‘Buy, not build’ mantra for growth

While the rising interest rates and uncertain economic outlook raise concerns, investment banker Morgann Lesne from Cambon Partners says it could be the one-off opportunity for ‘brave’ buyers of travel companies, as prices now represent better value than anytime in the recent memory. ‘Buy, not build’ strategy could be the mantra for growth in TRAVTALK, he adds.

TT Bureau

Rising interest rates, an uncertain economic outlook, concerns about what happens when ‘revenge travel’ ends, and the collapse of Silicon Valley Bank have resulted in a wave of write-downs in the valuations of not just travel startups, but also of mature travel businesses all over the world.

However, this presents an opportunity. “We are now entering into a buyer’s market, and this (write-downs in the valuation of travel companies) presents a one-off opportunity for the brave buyers out there – including in the Middle East,” says Morgann Lesne, an investment banker from Cambon Partners.  “Buy, not build” strategy could be an answer for growth in the Middle East,” he adds.

Morgann has personally advised on more than 60 travel mergers and acquisitions over the last 10 years. “Prices now really represent better value than ever before for those out there with secured financing or sitting on cash – in fact not just prices are negotiable, but so are terms in general, including the payment schedule, we are seeing this in the Middle East and in all markets,” he says.

In the past, higher valuations had pushed investors and entrepreneurs to search for organic growth. But, Morgann says, “Perhaps this era is coming to an end, temporarily at least, as a buy, not build strategy looks like offering better and quicker returns. Now is the time to be courageous.”

Reflecting on the medium-term consequences of the current trend for lower valuations in the Middle East and elsewhere, Lesne points out that this could result in a wave of consolidation across the travel technology space, as “too many startups, and even relatively mature companies were based on fast growth and rapidly increasing valuations, which is not happening now, as investors are pulling the plug and looking for quick exits.” He goes on to explain that the trend forces them inevitably into industry sales at a time when the underlying business is under pressure due to cuts in budgets and staff volatility.