The Budget on October 30 is driving a “frenzy” of merger and acquisition (M&A) activity in travel as owners and investors fear the chancellor could hike the tax on deals.
That is according to Chris Photi, head of travel and leisure at accountants White Hart Associates, who forecast a “hectic” October in the run-up to the Budget, saying: “There is a huge amount of M&A activity. We’ve never been busier.”
Speaking at the Travel Weekly Future of Travel Conference last month, Photi said: “We’ve seen a frenzy of all types of transactions. It’s off the Richter scale.”
More: Comment: Investor ‘frenzy’ is real vote of confidence in travel
He said private equity firms “have a lot of money they need to spend” and small-business owners who could not sell during Covid are now seeking buyers.
The investment in Newmarket Holidays by Soho Square Capital, announced on October 4, was one such deal, with White Hart advising Soho Square on regulatory approvals.
Travel Trade Consultancy director Martin Alcock agreed, suggesting “a queue of private equity firms are looking to move on businesses” and adding: “There is a bit of panic about capital gains tax (CGT).”
Chancellor Rachel Reeves is expected to raise CGT – levied on the profit from asset sales, most often at 20%. Alcock noted the rate could be aligned with income tax at “up to 45%” and said: “People are trying to complete deals by October 30.”
The time pressure has been exacerbated where Atol holders are involved because the Civil Aviation Authority must sign off on financial arrangements following changes of ownership and “wouldn’t look at anything” while processing Atol renewals in September.
The Budget need not mark a cut-off in investor deals, according to Rick Jones, corporate finance partner at consultancy PwC. Addressing the Travel Convention in Greece last week, Jones forecast a spate of deals in the next two to three years, with at least one M&A target, loveholidays, seeking a £1 billion valuation.
He told the convention: “Loveholidays is very publicly coming to market looking for £1 billion.”
Loveholidays chief executive Donat Retif last month denied knowing whether owner Livingbridge plans a sale, but parent We Love Holidays has been widely reported as up for sale. Livingbridge paid £180 million for a majority stake in the company in 2018.
Jones said: “Investors see growth in travel today and potential for growth in future.”