Cracking travel agencies’ acquisition code

Acquisition is the fastest way to penetrate a market and minimize stress on employees and systems.

Acquisition is the fastest way to penetrate a market and minimize stress on employees and systems. It can also improve operational efficiency, repaying acquisition costs and achieving higher operating profits while enhancing profitability by eliminating the competition.

Successful acquisitions require identifying the right targets and integrating the two businesses. American Express has long used acquisition as the preferred method of sales growth. A well-executed acquisition is more cost effective and financially beneficial to the acquirer than internal sales growth.

Acquisition Steps:

• Make sure acquisition fits into your overall strategy
• Qualify your acquisition targets
• Obtain necessary data
• Make your offer

Strategy:

• Reposition your business to become a dominant player in vacation packages
• Expand your company’s reach through multiple-owned channels
• Improve operating efficiencies to increase existing business profitability
• Enhance your brand
• Meet stakeholder requirements for profitability

Key Elements of Acquisition Target:

• Fit your preferred supplier portfolio
• Quality of management/staff
• Ability to improve scale/achieve operational efficiencies
• Less than three years on lease
• Three years of externally prepared financial statements, including sales by major category
• Break-out of owner’s compensation included in financial statements
• Recent 12-month productivity report by agent
• Written summary of current lease terms

Offer:

• Seller assumes all liabilities prior to purchase date
• Purchase price will be a percent of adjusted revenue for the 12-month period following the sale
• Purchase price will be a ?X multiple of the most recent adjusted earnings based on:

o Growth in cruise/tour sales
o Cruise/tour portion of total business
o Physical condition of location

Travel business consultants such as Travel Business CPR will also investigate and negotiate on your behalf. For more information, contact Tharwat Abouraya via email at [email protected] or by phone: 202-595-4867.

About the author

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Linda Hohnholz

Editor in chief for eTurboNews based in the eTN HQ.

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