Ongoing problems in the economy will drive a number of acquisitions among travel agents, a new report predicts.
Plimsoll Publishing senior analyst David Pattison said the report, The Plimsoll Analysis – Travel Agents, shows larger companies are looking to diversify while smaller agencies are looking for the financial security being acquired offers.
These needs have been amplified by the current market, making a number of deals in the near future increasingly likely.
Pattison said: “It has a great deal to do with necessity. Many of the larger players in the market, despite the downturn, are desperate to find new ways to develop their business, but with the current climate, costs are being cut and business development is being slashed.
“So they need options to help them protect their futures and tap into exiting revenue and profit streams.”
Acquisiting a new company allows businesses the chance to increase sales at a relatively low cost but also lets them break in to emerging markets, Pattison added.
Of the 1,000 agencies surveyed, around 228 are ripe for acquisition with the best agencies reporting year-on-year sales increases of 18.3% and margins of 3.7%.
He added that not only does an acquisition offer the smaller company security but it also gives it the chance to access more money and resources to grow its own business.
Pattison said: “It would be a pity if some of these exceptional businesses went to the wall or do not get the maximum chance to prosper just through a lack of funding.”