Deal or No Deal: Travel M&A 2021
Summit Advisory helps travel business owners and directors grow, acquire or sell their travel business.
Covid-19 certainly put many of our highly promising M&A deals for 2020 on ice. However, already in January 2021 we are seeing early signs of a ‘defrost’, very much instigated by potential Buyers.
A number of overseas and UK travel businesses, keen to grow through acquisition, have contacted us just recently. Most are backed by private equity, but, not all.
What they do have in common is a strong vision for their own future and clear strategic goals beyond the immediate Covid-19 crisis. Most importantly, they have the cash reserves, or access to cash, to implement their acquisition ambitions.
We’re not talking here about ‘vultures’ waiting in the wings to swoop down and devour distressed travel businesses although these are certainly out there and hovering. Rather, quality travel businesses looking to their own future exits in 3 to 5 years’ time for which a ‘buy and build’ strategy makes perfect sense.
But what about Vendors?
Trading in all travel businesses is at an all time low. Most travel business owners who had been looking to sell last year or this year, before they had to factor in Covid-19, assume a sale is currently now impossible and certainly at anything like a reasonable price. Some have told us that they are thinking of simply shutting up shop (not necessarily aware of the costs involved in doing so) or are reluctantly resigned to having to put in more years of hard grind to return profits back to pre-pandemic levels before they can sell.
‘Covid has decimated my profits so it can’t be worth me selling now’ is what many say to us.
However, serious Buyers appreciate that, if ever there was a case for an ‘exceptional’ adjustment in relation to profit performance, it is Covid-19! So, if you’re a potential Vendor, rest assured that Buyers that have identified your business as a good strategic fit will make allowances for Covid’s hit on your numbers. They are fully aware that, unless they do so, they will simply not complete deals with their target Vendors.
‘Surely profit multiples will be terrible’ is the next potential Vendor comment we hear.
Certainly we do not anticipate any record-breaking multiples for travel business disposals in 2021 unless there is a compelling ‘travel plus tech’ story at play. However, this does not mean that good prices cannot be achieved for quality businesses that have a history of successful trading pre-Covid 19. Of course, the best driver of price and favourable deal and payment terms, remains competitive tension. That’s as true now as it ever was. This is where the right corporate finance advisors come in.
Remember, too, that when it comes to selling a travel business, sale preparedness also maximises the chances of a successful outcome. The more prepared both the business and the owners are for the complexity, rigour and scrutiny of the sale process, the better. The right preparation takes time. It’s never best done on the back foot. We frequently liken selling a travel business to having a baby. It takes on average 9 months from start to completion, assuming no issues along the way.
It might seem counter intuitive to start an exit preparation programme in the midst of the Covid crisis but, if you think you might aspire to sell in 2021 or 2022, or be ready to capitalise when a travel M&A upturn arrives, why not investigate what is needed to be done now and get started? Just because your business might currently be in hibernation, does not mean that your End Game has to be too.
You will only sign on the dotted line if the price is right. So what have you got to lose?
To discuss how Summit Advisory can help, please contact Deborah Potts
M: 07980 779805
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