INVESTMENT IN TRAVEL Travel M&A poised to resume off the back of recovery


airlines, particularly low-cost airlines. We see companies taking less risk by ensuring deposits are at least sufficient to cover the amounts they have to prepay ە WRbVHFXUH IOLJKWV


THE RETURN OF M&A M&A activity overall has fallen dramatically. But activity in travel picked up as 2023 progressed. Flight Centre acquired luxury tour operator Scott Dunn in January. Then a flurry of deals followed in June, when Wayte Travel Management acquired Quintessentially, PE investor Perwyn bought Cruiseline, Intermediate Capital Group bought Direct Ferries and Hyatt Hotels acquired hospitality platform Mr & Mrs Smith. In August, Clarity Travel purchased


travel management company Agiito, and in September, Good Travel Management acquired the corporate travel division of Wexas and Primary Capital invested in Diversity Travel. Hays Travel completed a series of acquisitions, including that of Just Go Travel in September. Travel Weekly owner Jacobs Media Group acquired Online Travel Training (OTT) in November and prevented the company going into administration. There were deals too in aviation,


although these remain subject to regulatory review. British Airways and Iberia owner IAG resurrected its deal to buy Air Europa in a €400 million takeover, and Air France-KLM and US private equity firm &DVWOHODNH KDG D


bELOOLRQ ELG IRU 6$6


Scandinavian Airlines accepted in October. Deloitte financial advisory partner


Gurm Dhillon explained the more general picture in M&A, saying: “Interest rates caused the slowdown. The cost of capital has gone up. But it’s relative. There was a golden period because the cost of capital was low. M&A volumes and values now are probably on a par with 2019. But it feels like a correction was due in the M&A market, in particular around pricing. “There is a lot of private debt


available, it’s just more expensive and pricing expectations have to come down. We’re starting to see deals come


36 Travel Weekly Insight Report 2024


We’ll see some transactions in the first half of 2024, but we might see more in the pipeline as people gain confidence about 2024 and some visibility on 2025 bookings


through. Most people feel we’ll see more M&A in 2024 than 2023, probably ە IURP WKH VHFRQG TXDUWHU RQZDUGV He noted: “Travel and hospitality have


been buoyant post-Covid. We’ve seen a lot of M&A in the hotel sector and that will continue. Fundamentally, people believe in the resilience of travel and hospitality. “There is also a stack of online travel


agencies and tour operators owned by private equity which invested in 2016 to 2018. Most PE investors put in extra equity over the Covid period and there is a need to realise a return on that. Most of these businesses had a great 2023, therefore 2024 is a logical time to try to exit. The issue all investors will be considering is, ‘How sustainable was the demand in 2023?’ “What investors think will depend


on the type of business. Experiential travel, luxury and group travel are probably more resilient because of the customer demographic. It will depend on the segment a business is focused ە RQ DQG WKH OHYHO RI IRUZDUG ERRNLQJV Dhillon added: “Valuations are going


CUTTING costs and


increasing cashflow were the top priorities of businesses going into 2024 (Figure 46)


to be impacted by the price of debt. They will come down, but it will vary by business. A UK business with potential to grow in the US would likely attract a higher valuation than a UK-centric business which doesn’t have much


FIGURE 46:


CORPORATE PRIORITIES IN 2024 Average ratings by CFOs on scale of 0-100


Reducing costs


Increasing cashflow Reducing debt


New products/services Disposing of assets Acquisitions


Increasing capital expenditure 0 15%


14% 17%


15% 10


20 % 30 40 50 51% 47% 21%


% age point change YoY


+3 +4 0


-9 +5 +4 +3


60 Source: Deloitte CFO Survey, Q4 2023


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