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How to make Money from

Travel Technology

Gerry Samuels, CEO, Travel Capital

Simon Cope-Thompson, Partner, Livingstone Guarantee
Livingstone Guarantee LLP

ƒ The UK’s leading mid-market M&A boutique, focused on transactions worth

between £5m and £100m plus
ƒ Sole focus on M&A – no due diligence and no audit, etc.
ƒ Experienced in acting for acquirors, VCs/PE houses, vendors and management
ƒ 21 professionals plus nine industry advisers based in London
ƒ Completed over 300 deals in the past 10 years
ƒ Co-founded international partnership, Global M&A, in 2003; today this is the
world’s most active partnership of investment banking boutiques, with 28 leading
independent M&A boutiques covering as many territories across Europe, North &
South America, and Asia/Pacific
ƒ Simon Cope-Thompson one of six partners; joined in 1994; leads LG/GM&A’s
Leisure and Retail Team
What are investors really looking for?

Investors across the board are looking to manage their risk. As a result, they
typically look for the following characteristics:

ƒ Proven management team – ambition/greed of management

ƒ Established business model/defensible concept
ƒ History/visability of revenues, profits and cash generation
ƒ No key/single customer dependencies
ƒ Rapid growth potential – both from the company and the market
ƒ Predictable cash flow, once established
What is the most effective way of raising
Development Capital?

ƒ There is no “one size fits all approach”. You need to match your/the company’s
needs with the funds that are available/appropriate. Take advice early
ƒ Be aware of the variety of different sources of funding (e.g. family/friends,
angels, VCs/private equity, debt providers/banks)
ƒ Adopt a structured process; begin at least six months before you need the
cash, ideally nine months
ƒ Understand your ‘walk away’ position
ƒ Target funders selectively at first
ƒ Create a competitive tension if possible
ƒ Do not take your eye off the ball
ƒ Once you’ve shaken on a deal, beware of chiselling
ƒ Always aim to keep an interested investor in reserve
How should you go about developing a Business
Plan & Model ?

ƒ It must be management’s strategy and not an adviser’s!

ƒ It is a selling document: upbeat and accessible, but also realistic and
ƒ Will take three to four weeks to refine
ƒ A credible adviser’s badge should enhance investor interest
ƒ Will set any investor’s expectations of management and anticipated financial
ƒ Will be heavily scrutinised and challenged during due diligence process
How should you go about developing a Business
Plan & Model (cont’d)?

ƒ Executive Summary
ƒ History & Background
ƒ Management: proven; balanced; ambitious
ƒ Products & Services: USPs; IPs; roadmap
ƒ Market: defensible niche in sustainable growth market?
ƒ Customers: quality of clients, relationships, sales pipeline
ƒ Strategy & Prospects: growth, growth, growth
ƒ Financial Summary: historic & forecast results
ƒ Specific Issues: pensions, environmental, bonding
How can travel technology entrepreneurs
maximise value from this sector?
ƒ Define your own personal objectives e.g. lifestyle vs build and sell
ƒ Map out your exit strategy and process
ƒ Get your business in good shape prior to an exit; early appointment of specialist advisors
ƒ Establish a list of potential acquirers for your business
ƒ Understand the rationale of potential acquirers:
− Market share/position
− Critical mass
− Growth prospects
− Geographic expansion
− Customers
− Profits – absolute and margins
− Intellectual Property / New Product
− Management
− Stop the competition
− Timing
ƒ Key is to make it a “must have” acquisition rather than a “nice to have” bolt on
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Travel Technology Case Study WORLDSPAN V=1 P=1 M KACT SY AV RDY 01

¾ Travel e-Business and Middleware specialist, providing a

range of products, solutions, infrastructure and services
¾ Expertly addresses the complexities of International travel
¾ Exceeded revenue and profit goals:
25% net margins, FY2000

Dublin operation commences
Contracts signed with 4 Airlines,
2 Online Travel Agencies and Worldspan
Austrian Airlines
Air Tickets Direct/Travelocity UK
July: Trinity Venture Capital investment
Thomas Cook
Virgin.com/travel; Virgin Travelstore
Qualiflyer Group
Delta Air Lines
Northwest Airlines
April: Move to new Headquarters
August: Development Centre opened
in Krakow, Poland
Travel Technology Case Study
Travel Technology Case Study
Sabre acquires Gradient

ƒ Sabre is one of the world’s largest Global

Distribution Systems
ƒ Market Cap ~$3bn
ƒ NYSE listed (Ticker: TSG)
ƒ 6,000 employees
ƒ Headquartered: Dallas, TX
ƒ Gradient Advisors: JP Morgan Chase H&Q,
Skadden Arps
ƒ One of the year's largest buy-out
transactions in Ireland
ƒ Gradient merges with Sabre “WebRes” to
form Sabre Online Travel Solutions,
headquartered in Dublin
ƒ Gradient offers Sabre a more flexible,
middleware platform with international
capabilities and long-term client base
Can travel technology entrepreneurs still
continue to profit from this sector?
ƒ Major acquirers historically have been GDSs and large online players
ƒ Higher premiums paid to acquire product-based companies
ƒ Typical valuation ranges x8 – x12 Earnings
ƒ A stock exchange listing has been an option for few travel technology companies
(e.g. Optims – Paris Stock Exchange New Market, Cyberes - AIM, Datalex – NASDAQ/ISEQ)
ƒ Trade sale may be the most realistic exit strategy
ƒ Recent deals:
Company Investor Acquirer Amount Transaction

KDS Accel Partners $13m Oct 05

Atlas Venture

Travelink Comtec Undisclosed Jun 05

Optims Amadeus €20m est. Feb 05

Kayak Sequoia Capital $15.5m Dec 04

General Catalyst
SynXis Sabre $40m Dec 04
How long before the bubble bursts?

ƒ The high-tech bubble did burst in late 2000 following a spate of deals in travel
technology sector
ƒ There has been significant Mergers & Acquisitions (M&A) activity in online travel
and specialist tour operating, fuelled by the growth strategies of Cendant,
Interactive/Expedia, Sabre/lastminute.com, Amadeus
ƒ Pure travel technology M&A has been quieter, save for:
− hotel technology companies enabling GDS Merchant Hotel plays
− “tuck-in” airline software companies to broaden the offerings of the mega-
airline IT players
− travel search engines, the new “sexy” sector
ƒ Signs of an uplift in valuations and the volume of transactions
Investment Focus
Investment in Travel Technology Specialists and Software Companies

Investment in Tourism Infrastructure in Developing Markets

Investments in 2 Mobile Software Ventures:

• Payments
• Content


Gerry Samuels, CEO, Travel Capital

020 7443 5400

Simon Cope-Thompson, Partner, Livingstone Guarantee

020 7484 4706