Private equity (PE) investors are “starting to take note” of travel again despite a slowdown in mergers and acquisitions (M&A) across the economy.
That is according to leading industry accountant Chris Photi, head of travel and leisure at White Hart Associates, who hailed a “really positive” third quarter of the year for travel M&A.
Photi told the Business Travel Association (BTA) conference in Antwerp last week: “M&A got off to a slow start in 2023, but it has been an exciting third quarter. Holidays remain a priority for consumers despite the cost-of-living crisis, and the investment community is starting to take note.”
However, he warned business leaders and investors that CAA and Iata requirements when a company changes hands can be onerous.
Photi noted “the regulator must be satisfied”, saying: “The Atol terms require you obtain CAA approval before a shareholder or group acquires more than 20% of [a company’s] issued share capital. The CAA doesn’t like it if they find out your business is up for sale before you tell them. They truly are the most intrusive and invasive regulator.”
He outlined a five-step process for informing the CAA and warned: “The process takes some time and seems to be taking longer.”
Photi also warned: “Two months prior to the Atol renewals in March and September the CAA prioritises renewals and that causes delays. All those involved in transactions want to move forward fast, but the CAA won’t.”
The CAA’s Atol committee will want to see group structure chart, he said, along with business and strategic plans, all transaction documents “which can run to hundreds of pages”, and all financial modelling with “full profit-and-loss accounts, at least one year of historical data and a two-year forecast”.
Photi told the conference that Iata can also be “a difficult organisation to deal with” over a change of control, branding the airline association’s ‘change of control’ forms “an absolute nonsense”.
He noted Iata defines a change of ownership or majority shareholding as “a risk event” which automatically means a downgrade in risk status for 24 months, meaning a switch from fortnightly to weekly BSP payments and the imposition of credit conditions – although this can be overruled by a favourable assessment by Iata’s global financial assessor.
Despite these hurdles, Photi highlighted “three big M&A deals and consolidation plays” in the corporate travel sector, including the acquisition of Agiito and rail-ticketing platform Evolvi by Clarity, business travel division of Portman Travel, in August which combined the eighth and 12th-largest UK TMCs.
He also spotlighted Wayte Travel Management’s purchase of Quintessentially in June, and Wexas Travel Management’s acquisition by Good Travel Management at the start of September.