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For the best exit strategy, hold for a few years until the market stabilizes. For the deal, shop now.
Justin Dawes
Hotel technology startup Mews has completed five acquisitions in the past three years. Its CEO, Richard Valtr, told Skift last week that there are two more in the works.
He also said he expected to see more consolidation deals during this volatile economy. That makes sense because as a buyer, he’s probably more attuned to the world of startups looking to sell.
For Mews and other venture capital-backed travel tech startups, now is a good time to buy because of low valuations. But, by the same token, it also means it’s a terrible time to sell.
Greater uncertainty about the economy over the next six months has rattled the wider tech sector with household names laying off thousands of workers. This is casting a long shadow over travel technology as well.
Business-to-business travel technology companies are generally doing well right now, but some experts expect the overall number of major mergers and acquisitions to slow until the economy stabilizes.
There are still travel tech acquisitions happening now, but most of the companies looking to sell are ones that really need to, said Chris Hemmeter, managing director of Thayer Ventures, a venture capital firm focused on the travel technology industry.
“I think the people who can will stay, and then the people who can’t will have to go into a market where the multiples will be much lower. I think all of this will lead to less activity, not more,” Hemmeter said.
For companies with big growth goals, which venture capital-backed startups like Mews always have, buying similar companies is a faster way to do it. Mews provides a property management system for hotels. Its acquisitions have helped the company expand into Europe, where it has found success in a very old industry that wants to modernize.
Matt Zito, a mergers and acquisitions broker for travel tech companies, said the startups that need to sell are the ones that haven’t started making revenue and therefore have declined during the pandemic.
“I’m very selective with the ones that don’t make money or have no income,” Zito said. “There are a lot of them out there. There’s a lot more to it than people think, let me tell you.”
Zito is the managing partner of travel technology consultancy TSI, where he said he spends about 80 percent of his time on mergers and acquisitions for both buyers and sellers. This firm started the Travel Startups Incubator in 2015, which invested in more than 20 startups.
He expects to see more “acqui-hires” during this time – when one company buys only the employees of another and the technology product is usually left behind. That’s often the case when a purchase price is undisclosed, he said.
Another problem preventing acquisitions during this time is the lack of a technology workforce, he said. Especially if a large company with old technology buys a startup with new technology, there must be workers who can integrate the two.
“One of the biggest problems in the market right now is people,” Zito said. “I think that’s a bigger problem that people are talking about.”
He believes this is why major global distribution system companies refused to buy one of his initial customers.
“They passed one that could have saved, I thought, maybe millions of dollars a year for their clients,” Zito said.
Here are some of the travel tech acquisitions that have happened in recent months:
