Agency owners seeking a buyer must avoid the risk of selling too early but must also avoid selling too late, with good timing critical for a successful deal, according to Bob Sweeney, president, Innovative Travel Acquisitions, Inc., a leading travel industry broker.
"It is an active market again for the purchase and sale of tour and travel companies across North America, " Sweeney said, but warned that it's tough for agency owners to negotiate the buy/sell minefield.
"The key is to have an exit strategy that allows agency owners to compare opportunities. Sell into strength," he recommends, having negotiated over 560 acquisitions and sales in 22 years of his firm's history.
Sweeney believes that there are many roadblocks for agency owners to make a profitable sale, including timing. Offering his reasons buyers hold off on making solid offers to sellers, Sweeney says emotion and ego top the list.
"Agency owners justifiably take pride in what they have built but should not let emotion blur a profitable sale. Stay cool and calm and park the ego. Its a critical financial transaction."
"The key point is that for most sellers it is their first time entering into their largest business transaction. Don’t go in blind. It is a jungle out there and slick buyers charm folks into signing a poor transaction. They need to know a solid offer from a weak one. I will use an agent on any foreign travel - agents should use an agent/broker when selling. The cost of mistakes is high."
Another roadblock is limiting the buying pool only to a buyer from the agency's consortium, a decision Sweeney says can prove costly. "Consortia membership is a factor in any sale but selling owners must widen and deepen the pool of potential buyers - not limit it. Ownership in a consortia can be a critical revenue source."
Consumer demand for travel is strong, Sweeney says, and there are many potential buyers who see opportunity in travel agency ownership. "Agency owners are aging and putting off a sale is a risky strategy. Owners should give themselves time - a year or two - before they are ready to retire. It's a major transaction for sellers and buyers. It shouldn't be rushed."
Buyers are also skeptical about aging staffers who may retire, leaving new owners with agents without experience, he notes.
Sweeney also suggests using a knowledgable broker and travel attorney to manage the process and avoid "uneducated, excessive value expectations."
"A travel business known to be for sale has less value," Sweeney says urging confidentiality of any transaction.
Buyers also like to negotiate on their own long term contracts such as leases and GDS contracts, Sweeney says, stressing the need for good financial records and monthly CPA reports. "Buyers will make a financial decision based on fact."
Other concerns of buyers noted by Sweeney include a top heavy client list when 50 percent of business is linked to one account. Client payment records are another factor. "Buyers do not want to chase money."
Another deal killer is telling buyers of another buyer and protesting non compete terms. "This is a red flag to buyers."
Sellers must be ready to let go, Sweeney argues. "Sellers must smile when picturing themselves after the sale is complete."
"Again, the risk of selling too early is small compared to selling too late," Sweeney warns."Give yourself and a qualified buyer time to perform due diligence."
"As a rule agency owners should list the business 18 months prior to stepping away from it as many buyers require a one year post sale commitment from the seller," Sweeney says.
Sweeney forecasts an active market for profitable, well managed agencies for the balance of 2013 and well into 2014. "Few agency owners can go it alone in the sale of their business. It takes expertise, including use of a travel savvy broker and lawyer, to identify qualified, serious buyers."