TTG – Travel industry news

Travel’s post-pandemic bounceback has underlined how in normal times it is one sector where the demand curve only ever goes one way – up. Time and again, investors have commented on how attractive the industry is, despite low profit margins. So what does 2024 hold for mergers and acquisitions?

 

Martin Alcock, Travel Trade Consultancy director, advises companies buying and selling, as well as on Atol. “We’re seeing lots of companies positioning for a sales process in 2024,” he tells TTG. “They’re lining up advisors and putting out the feelers.

“It’s all off the back of exceptional results in summer 2023, and the continued momentum going into winter. Operators have a really positive story to tell, backed up by evidence that consumers are ring-fencing and prioritising travel spend.”

He highlights one category of company appealing to buyers: “The deals we’ve worked on in 2023 involved companies with very specialist product niches, with highly defensible market positions,” he continues. “I think those sorts of businesses will always be attractive to buyers.”

 

’Momentum growing’

So what could go wrong in 2024? For a start, there is the economic and political situation, with higher cost of living and especially borrowing an issue, plus the crisis in the Middle East and elections in the UK and the US disrupting financial markets.

Deborah Potts, a director of Summit Advisory, warns: “Where external funding is required, high interest rates are proving a challenge. If a deal requires regulatory approvals from bodies such as the CAA, these have more challenges to overcome, especially if buyers new to the UK or travel industry are involved.”

Potts, though, is upbeat about 2024: “In terms of buyers, we do believe there is credible and growing private equity interest in specialist areas of the travel industry once more. If all the deals we are aware of complete, they will involve a mix of trade and private equity-based acquisitions.”

Potts had been expecting to announce “an exciting deal” in December, but events in the Middle East put paid to that. Nevertheless, she believes 2024 will be a strong year for M&A in travel, subject to known – and unknown – external events.

“Momentum continues to grow,” she insists. “Each time a deal completes, there are generally disappointed buyers who have funds in place to deploy for other potential acquisitions. We are busier than ever with a host of quality sale mandates and a growing array of buyers. It’s an exciting time.”

 

Despite the financial after-effects of the pandemic, brands still seem willing to swoop if an attractive proposition is available. Kuoni parent Der Touristik fired the starting gun on 2024 with its deal for Solmar Villas, which came to fruition after the family-owned firm approached the group.

It can be difficult to fathom what’s going on behind the scenes, especially when companies are not quoted on the stock exchange. However, one likely deal very much out in the open this year is a new owner for Tap Air Portugal, the country’s national carrier.

 

In September, the Portuguese government announced it was seeking a buyer for a controlling stake in the state-owned airline, with all three major European airline groups expressing interest. British Airways parent IAG, which also owns Iberia and Vueling, could be the frontrunner given its existing route network to South America, although any IAG bid may attract the attention of regulators.

 

Private equity back

Nicola Sartori, Grant Thornton partner and head of consumer, retail and travel, is another who believes the rebound in overseas travel means the appetite for investment “is here to stay”. Trade buyers are rousing as demand returns, while private equity interest is also starting to rebuild, she says.

“We’ve seen a continual increase in M&A activity in the travel sector,” she explains. “This started in early 2023 and built through the year. We expect this trend to continue into 2024, and as a result, anticipate there being many more completed transactions through 2024 than we saw in 2023.

“The key driving factors are a combination of confidence that the strong results seen in 2022 post-Covid weren’t a blip, and the fact that despite the cost of living crisis, consumers are prioritising travel over other spend.”

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