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Change take
For the best exit strategy, hold out for a few years until the market stabilizes. Buy now for the offer.
JustinDawes
Hotel tech startup Mews has made five acquisitions in the past three years. Its CEO, Richard Valtr, Customs change last week that two more are on the way.
He also said he expects more consolidation deals during this unstable economy. That makes sense, because as a buyer, he’s probably more attuned to the world of startups looking to sell.
To the stables and other travel tech startups backed by venture capital, now is a good time for acquisitions due to low valuations. But for the same reason, that also means it’s a terrible time to sell.
Greater uncertainties about the economy over the next six months have rocked the broader tech sector as many households laid off thousands of workers. That also casts a long shadow over travel technology.
Business-to-business travel technology companies are generally doing well right now, but some experts expect the total number of large mergers and acquisitions to decline until the economy stabilizes.
Acquisitions in the travel tech space are still happening right now, but the majority of companies looking to sell are the ones that really need to do so, said Chris Hemmeter, managing director of Thayer Venturesa venture capital firm focused on the travel tech industry.
“I think people who can will hold and people who just can’t have to enter a market where the multiples are going to be a lot lower. I think all of this will result in less activity, not more,” Hemmeter said.
For companies with big growth aspirations, which venture capital-backed startups like Mews tend to have, acquiring similar companies is a quick way to get there. Mews offers a property management system for hotels. Its acquisitions have helped the company expand in Europe, where it has thrived in a very old industry looking to modernize.
Matt Zito, a mergers and acquisitions broker for travel tech companies, said the startups that need to sell are those that have yet to generate revenue and have therefore stalled during the pandemic.
“I’m very picky about those who don’t really make money or don’t have any income,” Zito said. “There’s a lot of them out there. There’s a lot more than people think, let me tell you.”
Zito is the managing partner of Travel Tech Consulting TSI, where he said he spends about 80 percent of his time on mergers and acquisitions for buyers and sellers. This firm launched the Travel Startups Incubator in 2015, investing in more than 20 startups.
He expects more “acqui-hires” during this period – when one company just takes on another’s employees and the technology product is usually shelved. That is often the case when a purchase price is not mentioned, he said.
Another problem preventing acquisitions during this period is Shortage of technical workers, he said. In particular, when a large company with old technology buys a startup with the new technology, there must be people in place who can integrate the two.
“One of the biggest issues in the market right now is people,” Zito said. “I think that’s a bigger issue that people are talking about.”
He believes this is why the big global distribution systems companies refused to buy any of his startup clients.
“They passed something on to their customers that could have saved them, I thought, potentially millions of dollars a year,” Zito said.
Here are some of the Travel Tech acquisitions that have taken place over the past few months:
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