Outbound market fuels surge in travel M&A interest

The strength of the outbound market has produced a “surge” in merger and acquisition (M&A) activity with an unprecedented number of transactions underway, say senior industry figures.

Chris Photi, head of travel and leisure at White Hart Associates, said: “There are transactions everywhere. There is an absolute surge. We’ve never been busier and don’t expect a slowdown any time soon.”

He told Travel Weekly: “There is a logjam of deals that would have happened, if not for Covid, now rolling through, [and] a number of private equity firms with funds to spend interested in the space.”

Photi also suggested valuations “are creeping up, although they are nowhere near pre-Covid”.

Travel Trade Consultancy director Martin Alcock agreed, saying: “There is a return of private equity interest [in travel]. You have all these buyers who bought five, six, seven years ago waiting to find a buyer off the back of strong trading.

“A lot of people have waited for their moment. Now there is a window of opportunity, and there are investors with money to spend.”

Alcock suggested the acquisition of specialist tour operator Simpson Travel in March by private equity firm Risk Capital Partners – co‑founded by entrepreneur Luke Johnson – “made people sit up”.

Addressing the Barclays Travel Forum in London last week, Grant Thornton head of consumer and travel Nicola Sartori suggested the M&A boom marked travel out from other sectors.

She said: “Travel has been on a different trajectory from M&A more broadly and the broader consumer sector. The Ukraine war and cost-of-living crisis had an impact on M&A. Outside of travel, it’s really challenging.”

Yet Sartori described the travel M&A market as “buoyant”, saying: “People are experiencing such strong growth. A lot of people are in the market or about to go to market.”

Rachel Jordan, director of membership and financial protection at Abta, confirmed a surge in the volume of deals, reporting that Abta received 15 change-of-control applications from members in the three months to March.

Emma Skyrme, Barclays vice-president of leveraged finance and large corporate lending, suggested high interest rates are affecting the wider M&A market but not travel, saying: “Interest rates have doubled lending costs from maybe 5% to 10%. [But] we don’t generally see as high a level of leverage in travel.”

However, she noted: “Regulation has a massive impact [on travel M&A activity].”

Photi suggested uncertainty about the outcomes of CAA Atol reform and Department for Business reform of the Package Travel Regulations “is a big topic of conversation in all these transactions”. Atol reform could have implications for cashflow and funding if businesses are required to move to trust or escrow arrangements.

Speaking at the Barclays Travel Forum, Simpson Travel managing director Ed Pyke noted the operator moved to segregate client monies in an escrow account as it prepared for a sale, to be ready for whatever Atol requirements are introduced.

Photi said: “It’s a commercially debilitating situation.”

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