Valuations making further UK buyouts difficult, says dnata

Valuations making further UK buyouts difficult, says dnata

Middle East trade investor dnata is being presented with buyout opportunities in the UK on a weekly basis but is finding it a challenge to agree the right price.

Iain Andrew (pictured), divisional senior vice president at the firm which is part of the Emirates Group, told the Institute of Travel and Tourism conference it was now looking to expand in markets outside of the UK.

But he said the firm was also finding that difficult to do that because it does not have the knowledge or the network of people and advisers in those markets.

"At the moment we are trying to expand outside of the UK but we are finding that particularly difficult," Andrew said.

"I have a lot of respect for the UK, it's a very mature business, far ahead of where we are in the Middle East.

"That network was there through people we know and through advisors. We find that more difficult now where we look at Russia, Brazil or China where we do not know the markets.

"In the UK we are very impressed with the businesses, some we can afford, some we cannot. We still have a constant stream of opportunities but competition clearance makes it more difficult to do things in the UK."

Andrew added: "We are still looking at one or two opportunities a week, 90% is Europe and of that 70% is UK.

"I've got more opportunities than I can shake a stick at but getting it at the right price is the difficult bit. I still see an awful lot of opportunities coming through I just don't see the opportunities in other parts of the world."

Andrew indicated dnata seeks to agree deals with multiples of around four and that the way it works with business owners gives them the chance to retain equity.

"We give an awful lot of autonomy to the organisations we invest in. We do let the businesses run as they wish. We have not ripped the heart out of business which people maybe thought we would."

Since buying Travel Republic in 2012, dnata has amassed a sizeable portfolio of travel businesses in the UK with the acquisitions of Gold Medal from Thomas Cook, Travel2 parent Stella Travel Services and the partial buyout of Imagine Cruising.

Primary Capital director Rob Foreman said avel is a safe long-term prospect for private equity investment.

"One of the key dynamics we like about travel and leisure generally is it's been in long-term growth in terms of customer tastes and people have additional cash so what we are seeing is a drift in to leisure."

Foreman said the investor is seeing opportunities where founders of businesses are coming up for retirement and those firms are needing to go through a period of change either through bringing in new technology or internationalisation.

"They need private equity to take them through that period. We see lots of opportunities in travel. They are increasing. There is a lot of change going on, a lot of opportunities for mid-market businesses."

Gareth Healy, investment director of On The Beach and Scott Dunn investor Inflexion, said: "The reason we like travel is you can get high scalability.

"To get return on investment we roughly need to double the size of the business in three to six years. Ideas keep popping up in travel pretty regularly that have that disruptive potential."

Ben Johnson, a partner at Vitruvian Partners, said it likes to invest in more complicated business to business firms that are involved in the "plumbing" of the sector rather than being customer facing.

"We ask owners what would you do if you were unrestrained in terms of capital or cash. We try to be the empowering adrenalin that allows companies to do things they would not otherwise have done."

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