Airtours can improve the performance of small, specialist companies it buys and at the same time enhance its own image, according to UK Leisure Group chief executive Peter Rothwell.
Speaking at the ABTOF conference, Rothwell said: “We have not always had the best image. Buying companies can help us.”
He said Airtours UKLG can provide the culture in which small companies can expand.
“We can increase their performance and invest in those companies.” He said it was important that the acquisition had the potential to lead to synergies, cost savings and a hike in profits.
Referring to the proposed Kuoni/First Choice merger, Rothwell said: “The questions is: does two and two make more than four and are profits up, are costs down? It is important to have some commercial rationale.”
He said some purchases are regarded as having long pay-back periods, such as Airtours’ acquisition of Direct Holidays, which cost ú80.7m despite making a profit of only ú1.3m in 1997.
Other attractive qualities of small companies are ones where the operator has unique contracts and knowledge of a certain market, in which there are barriers to entry for competitors.
The company’s present owners should also be prepared to stick around following the acquisition. The selling price is usually tied into achieving pre-set profits.
“Do not reject performance deals. Understand there are considerable upsides. We have to make an acceptable return on our investment.
“The vendor has a tough decision to make,” Rothwell said.
The size of the companies means the bids are often uncontested by the Monopolies and Mergers Commission, which helps speed the acquisition, he added.
He said UKLGwas targeting the France market and urged ABTOFmembers who were interested in selling their companies to give them a call or contact Cresta Holidays managing director Steve Kimber or Eurosites’ chief Richard Allen.