TravelClick, a provider of revenue-enhancing technology to the hotel industry, has been sold for $930 million.
Acquiring TravelClick is Thoma Bravo, a US private equity group, which said it expected the deal to close in the second quarter of 2014. The deal represents the group's entry into hospitality.
The sale is a coup for the main venture capital firm involved: Genstar.
At the end of 2007, Genstar took over TravelClick for an unpublicized sum from its co-founders Ray Cohen and Richard Gray, plus private equity firm Bain. (Bain's venture capital arm grabbed a separate minority stake of about 10% in the firm.)
After M&A talks broke down last September, the hotel tech provider came back in play this winter.
Thoma Bravo appears to have jumped the auction set up by Evercore Partners and paid above a rumored $800 million asking price, though the parties declined to comment.
Explaining the buyout, Holden Spaht, managing partner at Thoma Bravo, said that the firm tends to invest in middle-market companies in fragmented and consolidating industries:
“The acquisition of TravelClick is consistent with Thoma Bravo’s strategy of investing in market leading companies with significant recurring revenue streams.”
A growth story, with caveats
The New York City company helps 37,000 hotels drive direct traffic with marketing and other services, plus help hotels generate revenue through business intelligence, reservations, marketing and media products.
Sabre and Pegasus are some of the other companies whose products and services somewhat overlap with TravelClick's in the market for helping hotel chains juggle their various distribution channels.
TravelClick has also built up market share for its business intelligence services in hospitality -- a space in which it joins HeBS digital and other players.
Since Genstar took it over, TravelClick has more than doubled its earnings before the deduction of interest, tax and amortization expenses (EBITA), according to Genstar. [CORRECTION: This article originally sourced this statement to TravelClick.)
Yet that growth has come at a cost. TravelClick has taken on debt that's 6.5 times of that EBITA.
Most recently, TravelClick received a $192 million loan in 2012 and then another $90 million in spring 2013, says Moody's. That compares to an estimated $250 million in annual revenue in recent years.
A long journey
The company tread water for a few years after the Gemstar purchase. But it found revitalization in CEO Larry Kutscher, who joined in 2010.
Since then, revenue has grown more than 35%, half of which now comes from outside the US, according to his interview with Tnooz did last September.
The management team has nearly doubled the company’s staff to about 1,100 and has opened 11 sales offices worldwide.
Kutscher said in a statement today:
"Our strong working partnership with Genstar and Bain allowed us to significantly invest in our business to drive growth both organically and through two significant acquisitions, which include the purchase of Rubicon and EZYield.
By updating our technology, building out our business intelligence offering, implementing a new reservation booking engine, and nearly doubling our sales force, we were able to grow distribution channels and new products."
A changed landscape
Amadeus's Jeff Edwards, head of its global hotels group, recently commented about the company:
They’re extraordinarily good at business intelligence (BI)... Over the years, they’ve built a very viable business around BI, taking central res for the long-tail market.
UPDATE: TravelClick talks about how the deal affects its future plans
EARLIER: Tnooz's profile of TravelClick this past autumn: "TravelClick boosts its revenue, staffing, and debt"