Matt Zito, TSi Managing Partner talks...
Amex GBT & CWT merger outlook
M&A environment and opportunities for TMCs in 2025
Will TMCs license, build or buy the next wave of tech?
After laying out
his projection for travel industry M&A in 2025, Matt Zito Managing Partner
and Head Investment Officer of TSi, a company that helps
incubate and broker sales of travel technology companies, spoke with BTN
Intelligence editor Chris Davis about the outlook for travel management company
deals. This conversation took place Feb. 18, a few hours after the U.K.
Competition and Markets Authority issued a preliminary report that the would-be merger of American
Express Global Business Travel and CWT would not weaken competition, flipping
its previous stance. Edited excerpts follow.
BTN: The U.K. CMA has put out an interim
report that signals it is reversing its position on the Amex GBT-CWT merger and
now thinks it will not harm competition. What do you make of that and what do
you think that means for the likelihood of the merger going through?
Matt Zito: It's hard to talk about
publicly traded companies. Especially for an acquisition, there are a lot of
regulations. I think for publicly traded companies, doing acquisitions is a lot
harder than it used to be. Probably why you're not seeing a large a lot of the
other large travel companies and [online travel agencies] doing a lot of buying
is just because it's so difficult to go through the regulations. It's more
political in nature than it is anything else.
BTN: Do you see the change in U.S. presidential administrations
playing a material role in the potential for M&A this year?
Zito: I think it'll help
M&A, especially for publicly traded companies. They'll think they have a
better shot at doing deals [since there] supposedly [will be] less regulation.
BTN: When you consider the other large TMCs in
the market, how do you assess how they may be seeing the market in terms of
M&A, especially in light of what's happening with Amex GBT and CWT?
Zito: Often it's driven by the owner and the
CEO and what they want to accomplish. There's a lot of TMCs in the market
privately with owners who are in their 60s and 70s, and they don't want to buy
companies anymore. I have one seller who was in the
market as a buyer for the last 10 years and bought 15 companies. Now he's going
to sell. There's a lot more interested sellers in the market than there are
buyers because people are looking to retire.
Some larger ones that have been around for a long time
that have solid businesses are looking to do acquisitions of smaller companies
or up-and-coming TMCs that have technology that they can integrate into their
tech stacks. The new breed—Navan, TravelPerk, Itilite— they build their own
tech stacks. They have everything. The legacies aren't going to be able to
compete with them if they do not acquire to get that or build it. I think those
players are causing a lot of owners to choose sides.
BTN: What types of technology
are the startups that are most in demand as acquisition targets by TMCs
offering? What types of tech are those TMCs looking to secure via M&A
rather than building?
Zito: Some TMCs are looking to
acquire online booking tools, expense management and AI tools. Mainly AI tools.
One TMC owner told me that in 2025 they will reduce their total operating costs
by 20 percent to 50 percent by implementing new AI tools. That's a pretty big
deal which will drive these reduced costs directly to the bottom line.
BTN: Given the competition
for that type of technology, would the likely cost to acquire those companies
still be a good deal for the acquiring TMCs? Is it possible in 2025 that market
gets too rich for legacy TMCs' blood?
Zito: The majority of TMCs
won't make travel tech startup acquisitions as they will look to just license
the technology from the startups. I don't see the travel technology seller's
market getting too rich because there just won't be enough TMCs as buyers.
Remember, TMCs are not really innovative and most will license first, build
second and then buy last.
BTN: Are legacy TMCs and the
newer tech players able to access the capital necessary for some of these
larger deals?
Zito: Yes, the capital is
there if you want to grow your business through acquisitions, whether buying
another TMC and or a travel technology startup.
BTN: Navan (formerly TripActions) and
TravelPerk themselves have purchased legacy TMCs. Should we expect more of
that from those companies? And are there other companies that may want to walk
down that path and look at legacy TMCs?
Zito: Well-funded TMCs will
continue to buy. They'll buy globally, and if they're not in a certain market,
they'll go into that market to buy.
BTN: Steve Singh last year was part of a group
that acquired Direct Travel, and he has several other companies in
different sectors of the managed travel and meetings business in his portfolio,
including Spotnana. Do you have any sense of what might be next there?
Zito: The strategy looks like
to me like he's doing two things: One, he's providing a safety net for startups
providing them with revenue and a big client integrated within. It seems like
he's almost making Direct Travel into like a software as a service, where it's
going to be a TMC and all these other technologies—Spotnana and Troop and all
the other parts of the tech stack—are going to be software as a service for
other TMCs. This is a unique model, and it'll be interesting to see if they're
going to roll it all in. My guess is that's what he's going to do.