2014 is shaping up to be busy on the deal front. Just make sure you manage your stakeholders.
Traditionally, travel sector articles written in January come wrapped in optimistic platitudes about the year ahead as bullish comentators talk up the return of the good times. This year was no different, and for the fifth year running the phrases “turned the corner” “recovery in sight” and “consumer confidence improving” littered the pages of many a travel industry publication.
So are things getting better? Whilst it’s often difficult to seperate frothy tactical posturing from the genuine improvement stories (it turns out some companies say trading is “amazing” when they really mean “achingly mediocre”) a more concrete sign of returning optimism is the rise in corporate deal activity.
According to the latest Mergermarket trend report released in January, Leisure was one of only three sectors in 2013 to show growth in the number and value of completed corporate takeovers. In what was an otherwise quiet year for UK M&A activity, high rolling Private Equity firms lavished £3.2bn on UK leisure acquisitions, their highest spend since 2009, and more than three times their outlay in 2012.
A month into 2014 and the trend seems set to continue with rumours of more deals in the pipeline. Private Equity firms are still actively seeking homes for their investment funds and there’s a noticeable uptick in interest from wealthy overseas investors. Both are making covetous eyes at any UK travel company with a niche and some growth potential.
Of course not all deal chatter translates to completed transactions and with so much complicated red tape, travel deals have to jump through more due diligence hoops than most. ATOL, ABTA, IATA, bond providers, merchant facilities and credit insurers can often be the most powerful stakeholders in a travel deal and achieving their approval can be more art than science.
So if you’re about to embark on the process, here are 4 steps that could help get your deal over the line. Get all of this right and your reward will be a smooth, efficient transaction with happy investors and few surprises. If you get it wrong? Well at least we’ve turned the corner and the recovery is in sight. Did you hear that consumer confidence is improving….?
1. Fail to plan, plan to fail.
Creating a formal stakeholder management plan will ensure nothing is left to chance and you don’t leave anyone out. Draw up a timeline working backwards from your planned completion date, and include how and when you will approach your key stakeholders for their blessing. Talk to them under NDA or on a no names basis where confidentiality is a serious concern.
2. Read the rule books.
Make sure you know who you need to tell and what you need to tell them. ATOL, ABTA and IATA all have strict rules on which changes are notifiable, and rule breaches can be punished by a show-stopping suspension. Be aware that changes of control can trigger increased bonding, so make sure this is factored in to your planned financial structure.
3. Sweat the small stuff.
Data hungry risk analysts require shed loads of information to sate their appetites and with any number of issues competing for their attention, even minor omissions can send your application back to the bottom of the pile. Avoid such unnecessary and costly delays by submitting a comprehensive detailed application, preempting likely questions upfront and responding promptly to any follow up requests.
4. Leave some fat in the timetable.
For one reason or another, the formal approvals process will take longer than you hoped. A straight forward change in ownership can take a month for regulatory approval and if additional bonding or cash injection is required you could even add a few more weeks to that. If circumstances permit, it’s definitely worth building in some contingency.
Article first appeared in TTG 10 Feb