Special Report: ‘Terrorism tops Brexit vote as impediment to mergers’

Industry chiefs assess the environment for M&A. Juliet Dennis reports from a Travel Weekly business breakfast

Terrorism is a bigger concern when it comes to travel industry mergers and acquisitions than Britain’s decision to leave the EU, according to a Travel Weekly debate.

Senior industry figures told the latest Business Breakfast on mergers and acquisitions, hosted by Google, that the vote for Brexit had not had the impact many feared, and indicated they were cautiously optimistic about the future.

Gray Dawes Travel chief executive Suzanne Horner said: “Brexit has not had the impact you would expect. Of course we are concerned; the key is to stay nimble.”

Will Waggott, chief executive of Travelopia, a portfolio of 50 specialist businesses up for sale by Tui Group, was confident travel would remain largely unaffected by the referendum vote.

“The fundamentals of families going away in the summer with their kids is not going to change as a result of Brexit,” he said.

“I’d rather the euro exchange rate was back to €1.5, and the US exchange rate doesn’t help, but people are still going on holiday.

“The biggest opportunity for us [Travelopia] is being sold and putting investment into the business so we can grow.

“The biggest threat is still terrorism. I hope it gets better but I don’t think it will. I’d like a bit more certainty on the geopolitical stage but I’m not sure I’m going to get it.”

Henrik Nordman, investment director at Bridgepoint Development Capital, which bought for £52 million last month, said Brexit remained a concern but conceded: “Customer confidence didn’t go off a cliff as we expected.”

He added: “Deciding to buy a travel business shortly after Brexit was not a difficult decision. Confidence was quite strong and still is.”

But he warned that any terrorist attacks linked to cruise ships would be a “disaster for the whole industry”.

The process of selling took place amid terrorist attacks in Paris, Belgium and Turkey and during the EU referendum.

Chief executive Seamus Conlon said: “We had Brexit, Nice and Turkey in the middle of it all. Brexit quickly translated into ‘is it going to affect consumer confidence?’ We were thinking ‘now what?’”

Despite this, he remained upbeat. “The market does recover, even from terrorism.”

Despite the mergers and acquisitions market being slow this year, it is now expected to pick up, according to Nordman.

He said: “Statistics show it was a bit quiet at the beginning of the year but it depends on the sector. During the summer we have probably seen fewer, new sales processes being launched but it’s a bit early to call.

“There is a lot of capital chasing relatively few assets. In September you would expect to see activity start picking up.

“You cannot really say that mergers and acquisitions will be materially down, particularly in the middle market. In the larger market you may think twice.”

M&A experts offer advice on minimising disruption

The secret to surviving a merger or acquisition is to have a separate, external team to manage the deal.

Business Breakfast speakers with experience of mergers and acquisitions described the sales process as “hugely disruptive” to senior management.

They advised any company planning a sale to ensure they had a trusted team, including a finance director, to handle the process, while ensuring managers were in place to keep the business on track. chief executive Seamus Conlon said it was typical for a company boss and finance director to be away from the business for “two to three months” to handle a sale or acquisition.

He was forced to devote the final months of his company’s recent sale to Bridgepoint Development Capital to the process.

“I was in London all the time for the last few months. Private equity companies don’t travel well,” he said. “The key thing to have is a finance director capable of steering you through the process.”

Gray Dawes Travel chief executive Suzanne Horner, speaking in the week the travel management firm was poised to make two acquisitions, said the company’s family owners expected the business to continue to perform well.

“We have to continue to demonstrate profits as well as being on the acquisition path,” she said. “You have to build a strong acquisitions team and have the rest of the business doing business as usual. Once we had identified a target, we had a team.”

Employees were kept informed, she said, but not of the names of companies being acquired until the deal was sealed.

“We never talk about who the target is but we talk clearly [to staff] about where the business is heading,” Horner added.

Will Waggott, chief executive of Travelopia, the Tui business up for sale, said he “regularly gets emails at 2am”, adding: “It’s disruptive to senior management and is a hugely complicated process.”

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