Maritz Buys McGettigan
The acquisition of McGettigan Partners last month by Maritz Travel Co. certainly will reduce industry competition for new clients but should not dramatically impact the operations of the companies' group travel and meetings management clients, as there is little overlap of respective client lists and McGettigan will operate as a subsidiary.
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The deal, the financial terms of which were not disclosed, allows for clients to use the resources of both companies, particularly McGettigan's meetings consolidation software and Maritz's technology offerings. It also allows McGettigan to continue to operate as a unit, retaining its Philadelphia headquarters.
The companies' clientele are different enough, McGettigan COO Christine Duffy said, that only seven companies use both McGettigan and Maritz's services, in some fashion, for corporate group travel or meetings management.
Likely, though, there are clients who specifically chose McGettigan's services over Maritz's and vice versa. Duffy acknowledged this, but added that since McGettigan will operate as a subsidiary, those clients' fears have been or should be allayed. "Our clients have reacted positively, and they want to know how this will add value to their programs," she said. "One area is that they'll have access to more products and more resources. We have some different pricing methodologies, but we also have differing methodologies within our company. There are differences based on programs—whether there are incentive programs, international programs or consolidation initiatives—and based on volume, and Maritz has the same differences."
Duffy said the weakened economy played no part in the decision to sell the company. The firm began seeking outside financial investment in the fall of 2000, from which emerged talks with Maritz.
"Our intention was not to be acquired," Duffy said. "McGettigan could have continued independently but we wanted to be a bigger player, and the clients we have need to be global. We needed investment for product development, technology and even acquisitions, and that would take a long time on our own."
Maritz CEO Jeffery Reinberg said McGettigan particularly is attractive due to its penetration into the pharmaceutical market, which has been relatively immune to this recession and largely unaffected by widescale meeting cuts. McGettigan pharmaceutical clients include GlaxoSmithKline of Philadelphia, Eli Lilly & Co. of Indianapolis, Merck & Co. of Whitehouse Station, N.J., Pharmacia Corp. of Peapack, N.J., and Wyeth, the Marietta, Pa.-based pharmaceutical business of American Home Products. However, the company did lose Bayer Corp. of Pittsburgh as a client when its contract expired in June.
"We have a small presence in pharmaceuticals and a decent one in technology," Reinberg said, "but this will give us both more opportunity. The lack of conflict made this decision easy. McGettigan has been our largest, best and most respected competition," Reinberg said. "There's never been a group travel company that has ever had this size, scope or resources."
Duffy said the deal shouldn't be viewed as a sign of lack of corporate interest in meetings consolidation. The opposite is likely true, she said, given the cost-control alternatives many companies have sought this year. However, she did acknowledge that developing a consolidation client is not a short-term process, and access to Maritz's nonconsolidated clientele was a draw for McGettigan. "Consolidation is a longer sale," Duffy said. "Maritz has a built-in list of customers, and we usually sell consolidation to customers with whom we have long-term relationships. We believe we'll have more of that access now."
Others agreed that the acquisition should not be seen as a sign of flagging interest in consolidation. "Some companies are now starting to look for a technology solution to track their meetings, or a calendar feature where meetings can be registered," said Kaye Mulkeen, executive vice president and general manager of WorldTravel Meetings & Incentives. "Those are great tools for companies to begin tracking meetings spending."
Though most of the alliances Maritz and McGettigan separately have formed with other companies are unaffected, one will be nullified: The partnership formed in September 2000 between McGettigan and the London-based incentive and performance improvement firm Grass Roots Group that produced a third company, Grass Roots McGettigan.
Grass Roots McGettigan initially was charged with consolidating European meetings expenditures for clients in the United States and abroad, but that deal will be discontinued, due to Maritz's European reach.
"The Grass Roots partnership is being dissolved," Duffy said. "Maritz certainly has a broader reach in Europe and around the globe, and we'll be talking with Maritz Europe to see how we can work together."
Some industry sources speculated that this may not be the final word in industry consolidation. One target of rumors is McCord Travel Management of Chicago, which recently created a performance marketing group that encompasses the company's group travel fulfillment offerings with incentive-related tools.
"Every travel management company in the country has heard about 15 different rumors," said Scott Graf, president of McCord's performance marketing group. "I suspect we'll hear more of that. I don't know that this deal changes much, but it's a good thing for McGettigan, Maritz and the industry. They have advantages, and it will make the rest of us tighten our belts to stay up with them. Companies could offer better pricing and more features."
Others said the economy could dictate further moves.
"This deal doesn't surprise me," said Jeff Lang, director of the meetings management division of Carlson Wagonlit Travel. "Every travel company's expectations about where business will be has changed dramatically. Every company must deal with changed circumstances, whether that means surviving on their own, selling or buying."
This deal, however, does not affect Maritz's relationship with American Express. Amex outsources the group travel and meeting management of its larger clients to Maritz, and an American Express spokeswoman said the company was pleased those clients would have access to more resources due to the acquisition.