Abta 2012: Choose the ‘right’ type of private equity for your business, delegates told

Abta 2012: Choose the ‘right’ type of private equity for your business, delegates told

By Melanie Hall in Turkey

Knowing how to make your company look special in the eyes of prospective buyers or private equity investors is key, delegates were told in an Abta travel convention session on mergers and acquisitions.

The panel discussion, featuring bosses from Iglu.com, All Leisure Group and AMR International, discussed factors driving M&A in the travel industry, and how businesses are being valued.

Following discussion about the banks remaining cautious about lending, Denzil Rankine, executive chairman of consultancy AMR International, told delegates to plan well ahead when it came to making their company look attractive to potential investors.

“In board meetings, you need to be shaping the business and thinking about what’s going to be attractive, either to private equity – and they will be thinking about their exit [strategy] before they go in – or a corporate buyer looking for the missing link they don’t have, or maybe geographical reach,” he said.

Rankine warned about “cosying up to the wrong type of private equity, one that doesn’t understand travel”, because when things go wrong, like the Costa Concordia disaster, then these investors “will freak out at something like this”.

His advice was to make sure that the potential private equity investor understands the world of travel, and appreciates that things do sometimes go wrong.

Timing is also very important, said Rankine, saying that over-leveraging a company and then leaving it too late to go to the banks or a potential buyer meant the business would be left in a tight negotiating spot.

Roger Allard, executive chairman of All Leisure Group, said the process of selling a business can take many months, and that bosses should not take their eye off the ball and forget about the day-to-day running of the company.

“I have seen companies where at the end of it, the profit has disappeared because the management has focussed on selling it,” said Allard. “So if you are going to do that, get a team in to manage the process and another team to run the business and generate those profits.”

Foreign investment was a key factor, said discussion moderator Peter Hemington, partner and national head of corporate finance at international accountancy network BDO.

Of the deals done by BDO, Hemington said the firm was seeing “massive interest from overseas buyers”, adding: “The UK is seen to have the most vibrant online travel industry in the world.”



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