In the latest of his reflections on the travel M&A market (mergers and acquisitions), Stewart Lambert – Co-Founder of the Firebird Partnership – takes a look at what’s happening in the sector now, including current trends in sales and buyers.
Writing about travel M&A in February, I spent some time considering what might lie ahead in terms of deals in 2024. Among my biggest observations then was that a “rush of transactions [remained] in the pipeline” and that I “wouldn’t be surprised to observe a large volume of deals this year”. That rush of transactions is now very much in the open.
“We’ve recently seen a raft of deals”
There has been a lot of activity since spring. A selection of the main transactions includes the following (by no means exhaustive) list:
The award-winning TAG Group selling to ECI Partners back in April
Simpsons Travel selling to Risk Capital in May
Firebird client Distant Journeys selling to Mobeus, also in May
The Travel Corporation selling to Apollo Funds in July
Martin Randall selling to Piper in late July.
More recently, in October and November, we saw another raft of deals, including:
Newmarket Holidays selling to Soho Square
Blue Cube merging after acquisition by an Israeli destination management company
Travelopia selling multiple brands in a new disposal programme
First Class acquiring sister businesses African Pride and Knighton Reeve
Inside Group acquired in an MBO supported by Cool Japan and Piper
Operation Europe acquired by BGF-backed Vosaio
Leger Shearings management completing a debt-funded MBO.
Last month we also saw the sale of Firebird client Travel Editions to the Artisan Travel Group, in a process that attracted a number of compelling offers.
“There are a few reasons so many deals are happening”
Why have so many deals been happening? I think there are a few reasons. A large one is the pent-up demand that had built in the system, both from owners wanting to sell and from private equity (PE) houses wanting to realise their assets.
Sales in 2022 and 2023 were challenging because of difficulties establishing what “normal” trading looked like. In many ways, 2024 was the first year not impacted by Covid or rapidly rising prices – enabling acquirers to confidently value businesses again.
Some of the deals I’ve listed above are retirement sales that were delayed to this point. Some are deals by PE houses, as they begin to sell the investments they made pre-Covid. The announcement of the budget at the end of October will have accelerated the timing of some of these transactions too, though it’s worth noting that all were deals that probably would have happened anyway.
“Announcements are likely to keep coming”
More sale announcements are likely to keep coming: there are still lots of transactions that many in the sector expect to happen in 2025 or 2026 – including Great Rail Journeys, Riviera, Hotelplan and Travelopia.
Frankly, nearly every PE investment made pre-Covid, where travel companies have been owned for 7-8 years (as opposed to the normal PE holding period of 3-5 years) is also a candidate for being sold. At the same time, we know that a number of owner-managers are contemplating the timing of their own exits at the moment.
“What’s interesting is the variety”
Going back to the deals announced this year so far, what’s interesting is the variety of transactions that have taken place, from investment by a sovereign wealth fund – as in the case of Inside Group – to smaller trade acquisitions – as with Operation Europe and Travel Editions.
Elsewhere we’ve seen debt-funded MBOs and even employee ownership trusts (EOTs) as in the sale of McKinlay Kidd this September; the first travel company I know which has gone down this route. (Others may follow, since EOTs combine the ability to sell shares free from Capital Gains Tax, and nevertheless retain up to 49% owner involvement.)
It’s noticeable that, on the whole, a lot of larger trade buyers – such as the Kuonis and TUIs of this world – generally don’t seem to be back to making acquisitions like they used to. Perhaps navigating on from the pandemic, and through the current cost of living issues, means most of the larger operators are choosing to remain super strategic? It seems that unless an acquisition is part of their long-term strategic vision, and/or of sufficient scale, they’re just not doing it.
I’ve commented before on the emergence of “new” buyer types however, and this is an interesting trend that seems to be continuing, with more small and medium businesses starting to become acquisitive (First Class, Voasaio, Artisan and so on).
“Selling in these conditions is not straightforward”
For me, the ongoing involvement from PE is the main takeaway from this year: a lot of the deals I’ve listed here have either been undertaken by PE houses or PE-backed companies (see Simpsons, Distant Journeys, Inside Group, Operation Europe, Travel Editions, etc).
As Clearwater Corporate Finance put in its widely-read spring travel sector update: “The travel sector has continued to be the highlight of an otherwise challenging environment for consumer facing assets.” In other words, PE’s appetite for investment in travel and leisure still looks strong.
With all of this activity, anyone contemplating an exit should consider their next steps carefully. Selling in these conditions is not straightforward: it’s worth taking the time to understand today’s trade purchaser population first, and also the appetite from PE if you’re at all entertaining this – and that’s as much about knowing when to exit as anything else.
Arguably there was a period in the summer where there were too many businesses being sold at the same time, potentially impacting valuations and the appetite to acquire. If you have the option to pause at this point, then it may be worthwhile waiting for 12 months to see how things unfold. But above all, talk to someone who really understands the current market. Get in touch with Firebird here to start that conversation.
Stewart Lambert is co-founder of the Firebird Partnership, with nearly 25 years’ experience in corporate finance, advising owner managers on selling their businesses, raising finance and making acquisitions.
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