Sales of Corporate Agencies Are Heating Up

Protravel International. Directravel. Ultramar. Azumano Travel Services. Polk Majestic Group. TravelCorp LLC. All Seasons Travel. International Travel Group. All are travel management operations. And all have been acquired since the end of the recession.

“This is a good time to be a corporate agency seller,” said Bob Sweeney, president and CEO of Innovative Travel Acquisitions, one of the largest agency brokers in the country. “Business is good, interest rates are low. And banks are making loans.”

There is always some degree of churn in the corporate travel world. Sweeney said his firm’s data shows the average corporate agency ownership lasts 14 years. That equates to a 7% annual turnover.

This past year commercial agency sales have been running well ahead of 7%, Sweeney told Travel Market Report. The pace of sales is picking up as the business travel recovery accelerates.

Multiple offers
Joe McClure, president of Montrose Travel, will attest to the quickening of interest.

“We are getting more inbound phone calls than ever before, asking if we are available. That tells me the market is heating up,” McClure said. “We have never made an acquisition and have always turned down purchase offers flat, but we’re still getting more calls than I remember.”

McClure isn’t the only owner getting calls from would-be buyers. Any agency owner who even hints his or her business might be for sale can expect multiple offers, Sweeney said.

Rising values
There are several factors driving the current increase in agency sales. One is the release of owners’ pent-up interest in selling, which they stifled during the recession.

“There were owners who wanted to sell in 2008 through 2011 but held off because agencies lost so much value,” said Robert Joselyn, CTC, president and CEO of Joselyn, Tepper & Associates and head of Travel Agency Management Solutions, or TAMS.

“Now that commercial agencies are making good money, they are getting good values and selling,” Joselyn said.

By the way, Joselyn said, agents should “ignore the press releases that talk about agency mergers. Merger is a word that makes sellers feel good. Whether you’re buying 100% of the business or 51%, these are all acquisitions, pure and simple.”

In the hunt
Rising values have transformed what was a buyers’ market during the recession into a strong sellers’ market. TMCs such as Tzell and Frosch that have long relied on acquisitions to fuel growth are eager to expand with the rebound in business travel.

Ed Adams, who is heading an industry roll-up for private investors Silver Oak Partners, is also on the prowl. The consolidation took the name of its first acquisition, Directravel.

Adams said the program is near closing on three or four new acquisitions and is in conversations with another six to eight owners.

“The industry has come back after a pretty severe downturn.” Adams said. He noted that earnings before interest, taxes, depreciation, and amortization (EBITDA) is up and as a result “people are testing the waters again.”

“There is definitely activity out there, including buyers from Australia.”

Australia’s players
The Australian buyers are Flight Centre and rival Corporate Travel Management. Both companies have been cashing in on rebounding business travel in the U.S. and Canada as well as expanding in Asia.

CTM founder and managing director Jamie Pherous told Australian reporters in 2013 that there are “green economic shoots” in the U.S. market that provide an opportunity to buy in near the bottom of the current growth cycle.

The Australian company bought TravelCorp LLC a few months later and expects to report more than $300 million in sales for North America this year.

Tough to reach the next level
Some companies are selling because thy have hit a wall in their organic growth.

“The owners don’t feel they have the expertise or the resources to move to the next level,” said Elaine Osgood, president and CEO of Atlas Travel.

“It can take time to close corporate deals, which can crimp TMCs once you get to a certain size. You have to work that much harder to grow organically. And some owners just don’t want to do that any longer.”

A lot of owners don’t want to do that any more.

Ready to retire
Sweeney noted that there was a surge in travel agencies’ interest in corporate travel after the airlines capped and eliminated agency commissions in the 1990s. While some leisure agencies closed their doors, many switched to corporate travel.

Twenty years later, owners are ready to retire.

“There is an increasing number of agency owners in their 60s and 70s and they are ready to move on,” Sweeney said. “The driving force behind most of the sales we’re seeing is really the calendar.

Good time to sell
“Corporate agency owners are in a good place today. It is all about supply and demand,” Sweeney said.

“There have already been so many rollups and consolidations, that there just aren’t many agencies left. A city that had 15 corporate agencies in 1990 might have three today. This is a very good time to be a seller.”

Next time: Valuing your agency