The Google-ITA Software mating dance is going into overtime and we still don’t have a public statement and an answer.
The story so far….
The story emerged from Bloomberg on April 20. However the rumour of the potential acquisition by Google of the ITA Software had been floating around since early March.
In normal circumstances deals of this sort don’t stay quiet for long and usually they have a short exclusivity time period to work out an arrangement before one party or the other has to put up some serious cash or risk a penalty for walking away.
Given the savvy owners of ITA this would be SOP for them. Normally in a deal of this magnitude the exclusivity period for talking is 60-90 days, definitely not more.
As a frame of reference the United-Continental discussions went from the zero-state with the announcement of UAL-US Airways merger discussions on April 7 to a full blown UA-CO public announcement less than 28 days later.
So one has to start asking why the Google-ITA deal is not done - not a squeak out of either party since the story in April.
So your intrepid and plucky contributor decided to dig a little deeper. As in cases of this type – I will issue the following disclaimer: No confidences were broken and no one has been physically harmed in the preparation of this story.
The similar sources to those who revealed the original Google deal in March have been hinting for some time that there was something afoot.
There are two rumour threads currently floating around. They are not mutually exclusive. One thread says there are “issues”. The other thread says there is another player.
Preceding the Google ITA story was a somewhat head scratching story in Tnooz on Valentines Day: Google takes Kayak by surprise, named as key competitor.
Depending on your sense of machinations going on in darkened rooms filled with cigar smoke, Google has been making a strong play for travel by acquiring some assets and in essence building a model adjacent to Kayak and other travel search engines.
Indeed it would seem I am not the only person who noticed this because this morning – Graham Robertson also picked up the story on his Project Wander Blog.
While I think his analysis is somewhat simplistic I do buy the basic thought behind it.
So what is happening?
There are the usual things – the two parties (Google and ITA Software) don’t like each other. There could be a degree of hubris on both sides.
There could be a big obstacle (or more than one), not least could be the Feds poking their noses into the deal, a move which could tie the ageement up in knots for a while.
In fact, in a deal of this magnitude, with significant impact across the board, one can imagine that the competition authorities not just in the US but also other jurisdictions would be very interested in such a matchup.
If not the authorities, then there is always the impacted market players – and there are a lot of those who are clearly watching this with various degrees of disquiet and in some cases outright alarm (queue the sound of rustling paper as people reach for their contracts).
In this scenario there is a fly in the ointment somewhere. It is interesting to note that there is a common ownership thread between ITA Software and Kayak in the shape of General Catalyst and Sequoia Capital.
And herein lies at least one cause of the friction, in my opinion. Either one party is getting greedy or another party is holding out to be made whole.
As Kayak, Microsoft's Bing (lest we forget) and other players stand to be affected as a result of a Google-ITA deal, is such a deal joyous news for non-common shareholders?
I will throw in an additional possibility. Consider a stalking horse or competitive offer from another player. The universe of possible players who could afford to plonk down the same amount of cash is not large. But it would include some interesting players that might not be on everyone’s radar.
I will not identify companies, however I will urge the readers to think about elements beyond companies involved in search (who are also candidates) such as a GDS, any company involved in the development or usage of fares and prices.
That gives a number of options and while the individual universe in each sector is small imagine that more than one sector is interested in making a bid.
Suffice to say that there are some lawyers who are sharpening their pencils (and eyeing that nice new Porsche) and some consulting and accounting firms who can see a short term bonanza of fees.
And the fat lady is not even warming up yet.