Agency Mergers and Acquisitions Expected to Increase in 2012


Bob Sweeney, president, Innovative Travel Acquisitions, Inc.

Corporate agency mergers and acquisitions in the travel industry will be plentiful in 2012 as business travel bounces back more quickly than leisure agencies from the downturn, Bob Sweeney, president, Innovative Travel Acquisitions, Inc. (ITA) told Travel Agent.

“Corporations have money to spend and see value in acquiring agencies. Business travel is recovering.  Premium tickets in the front of the plane are back in vogue. Meetings, conferences, and associations are all recovering and people are on the move and are traveling,” Sweeney said.

An industry veteran heading up a respected merger and acquisition firm, Sweeney believes today’s travel agents benefit from solid gains among consumers perception of agents value. “The past several years have seen real increases in consumer confidence in travel agents and the professional agents ability to deliver value.”   

Sweeney noted that the acquisitions made by Travel Leaders in the past year has underscored the value – and potential in the market– that savvy buyers have of well-managed groups of travel professionals.                                                        

 “Many vacationers want to be told where to go and what to see. Other consumers have been burned and wound up sleeping on the floor of an airport. They now cough up the $30 fee with pleasure. The do it yourself crowd never knows - once they’ve clicked the online checkout button - if they indeed did make the best value decision. The agents ability to deliver value is critical,” Sweeney says.

Since ITA’s inception in 1991, the company has sold 541 travel and tourism related companies. “Most recently we sold At Home In France, a French vacation villa booking business to French citizens. Another recent sale was Bon Voyage Travel of Coral Springs, Florida sold to Santa Ana, California-based Worldview Travel, a rapidly growing agency owned by Ricci Zuckerman. We are in the final stages of three more transactions expected to close in the next 30 days. “

One reason for Sweeney’s optimism is the aging of agency owners that will encourage sales. “Why do owners sell? There are lots of reasons: sickness, retirement, divorce, births or deaths, wanting time with grandchildren, the transfer of a spouse or simply burnout or a serial entrepreneur moving to the next opportunity.”

Allied to this is Sweeney’s conviction that the travel industry has to accelerate its ability to attract new talent to the industry. “We need strong, continuing campaigns to attract young workers. One approach is to stress a life style that is attractive rather than only looking at compensation. There is tremendous opportunity and rewards for owners and managers of successful agencies.”

How much is my business worth, remains is a basic question asked by agency owners, he says. “The fact is that your business is worth whatever the most motivated buyer is willing to pay you at the time you are ready to sell. There is no set formula that all buyers adhere to,” Sweeney answers.

Sweeney also believes that agency owners should never pay thousands of dollars for an appraisal unless it’s needed for legal purposes – divorce, estate matters or a partnership dispute. ”ITA can provide a low cost opinion of value for those who are curious to know what their business is worth or are contemplating a sale. Buyers pay zero credence to the results of a full-blown appraisal. Buyers have their own way of placing a value on your travel company.”

He also argues that service industry multiples have always been between 2.5 to 5.5 times EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). The higher the profit, the more the multiple rises. For example, $1M EBITDA = 5X multiple | $150K EBITDA = 2.5X multiple.

“Buyers complete transactions because of synergies that exist. It will take them less than 2.5 to 5.5 years for payback. Buyers only pay for delivered earnings and in my view potential does not sell. Purchase price is determined by the seller’s previous 12 month financial performance.”

 Sweeney says the top three deal killers remain to be ego, emotions and non-travel industry accountants and attorneys. “Our firm recommends two very wise travel industry attorneys. Rose Hache and Mark Pestronk are both wonderful at protecting their clients but do not kill or hinder transactions. Utilizing a travel industry specific attorney really makes for a better transaction. General attorneys have no clue about industry lingo and standard practices.”

Sweeney’s five tips for buyers include:  asset sale vs. stock sale equals no hidden liabilities; strong non-compete agreement to be signed by seller, respect and follow through with sellers, setting an expiration date for all offers (ITA recommends 10 days) and buyers should be prepared to walk if they do not trust the seller.

“We all want a stable and growing economy, but it is impossible to predict how things are going to shape up in the next 2-3 years. With all of the uncertainties that we face in the travel industry, we continue to see opportunity. For agency owners its never too early to explore your options and start planning an exit strategy.”

ITA is a member of ASTA and NTA.


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