What recent deals tell us about investors appetite for the travel sector.
Last Friday, the travel sector heaved a collective sigh of relief when Greybull Capital finally announced it had wrapped up its rescue of the Monarch Group. The deal saved the ailing operator at the 11th hour of its ATOL extension, and I don’t think it would be hyperbole to say it avoided a mini Armageddon.
Meanwhile, as the ink was drying on that contract, Equistone Partners, the Private Equity firm who already counted Audley Travel amongst its stable of investments, was finalising the acquisition of a chunk of Travel Counsellors, the iconic home-working business.
Whilst the back stories behind these 2 deals couldn’t be more different, they demonstrate the insatiable appetite for investing in the travel sector right now. In the case of Monarch, the fact that any offer was tabled at all shows a level of confidence missing since 2007.
Investment firms have cash to spend and banks are only too happy to chip in with leverage. It is, unquestionably a sellers market with recent deals valuing travel companies at between 8x and 10x EBITDA – profit multiples not seen in travel since before the recession.
All this activity is certainly keeping the regulators busy as they pore over the detail looking for risks. The UK are typically more interventionist than their overseas cousins but there are even reasons for them to be cheerful. The right investor can provide long term funding, bring valuable knowledge to a boardroom, and instill a financial discipline all too often missing from a sector fortunate to be funded by customer money.
There is certainly more activity to come, with rumours of further deals working through the pipeline and travel business owners up and down the land asking themselves the question “is it for me?”
Of course there is a lot to consider and closing a deal is not without its headaches. Expect a minimum 6 months’ grueling and protracted sale process and a Herculean effort to keep the tills ringing through the many distractions.
Nevertheless, travel is a sector so reliant on consumer confidence and so heavily influenced by global events out of its control that there is no telling how long this clamour will last before a “buck-a-roo”. I expect for many more owners over the next year, the answer to that question will be “yes”.
This article first appeared in TTG 6 November 2014