David Radcliffe
After one false start, Hogg Robinson Group went public on the London Stock Exchange earlier this month, opening with a market capitalization of £ 275 million ($514 million). Chief executive David Radcliffe said proceeds raised from the flotation would help the company reduce debt, fund pensions and "add to our firepower to do acquisitions." He spoke this week with The Transnational, as excerpted below.
Have you made further progress on identifying acquisition targets?
Whenever I say 'acquisitions,' people immediately focus on travel management companies, and clearly we are looking at some of those, but equally we're also looking to what I would call add-on service companies. I would love to do another Spendvision, for instance, so if there was another Spendvision [an expense management software firm] out there--which I don't think there is, to be honest--then I'd be interested. We bought Ian Flint Associates a couple months ago, and so you have seen us build up on the consultancy front. I think you'll see some more of that in time. An initial public offering is a pretty big exercise, and it really kind of did suck out a lot of resource from us, so you can expect to see us speed up again now. It was a pretty tortuous process. We were going to do it earlier, and then looked at market conditions and decided not to. Then, as you saw, we went into the market and held our breath because there was a lot of jitteriness. And then we went back and did it. All of that was a bit tiring, I have to say.
There was some confusion in the midst of all that. Can you offer some more details about the dynamics behind the scene?
Well it has been well-known for a long time, ever since we did the [management buyout, in 2000], that our ambition was to use venture capitalists to protect us while we changed the business, which we have done. We sold businesses that had nothing to do with corporate travel, we have bought businesses that did, and we have reshaped ourselves. The London market was very buoyant early last year, and this summer, it slowed down. And of course we were the first people out when we went back in, in September, and looked at the market, and quickly it became obvious that there were a lot of jitters, some wonders about the U.S. economy, oil prices [being] fairly high and people wondering whether interest rates would go up in the U.K. So a lot of the investors said they were interested in us, but not necessarily in the current package we had put forward. They thought we could be a bit more creative. So we said we were going to delay. We didn't say how long, and I've never seen anything like it: Within 48 hours, there were all sorts of rumors out there. And we have now floated and proved there was nothing [else] going on.
Right in there was the announcement of winning the Credit Suisse account. What set HRG apart on that selection?
You would have to talk to Credit Suisse, but I can tell you it did not have anything to do with the fact that we were using Credit Suisse as one of the four banks to do the IPO process.
What are the key issues today for global corporate travel buyers?
At the moment, I'd be watching the story about the value of the travel management company--those that have genuinely changed their model and invested in new services as opposed to those who seem to be chasing the cost per transaction downwards. The other issue I'd be looking closely at is what we call the 'All that glitters isn't gold' syndrome. You have seen a major change by global distribution systemsin the marketplace and a genuine change in income streams from one to the other. At the moment, various TMCs are standing up and saying 'We'll absorb this,' or 'We won't pass it on,'etc. And I'm not saying it's not genuine, but I am saying the corporate buyer has to be very careful about what is the price they pay for that. Are they linking to technology that ultimately costs them more money, doesn't actually work and may send their program backwards?
What can you say about HRG's technology platform development?
We're launching something in the coming months, but I have to be careful what I say now that we are a [publicly traded company]. The whole key to all this is not what people can see from the past, but what is being built for these circumstances--finding something that is completely independent and can 'plug and play' into anything without causing more cost along the way. We have been working for a long time on something that we think will prove to be great.