Entrant Seeks Mega Status

<B>Entrant Seeks Mega Status</B>

By David Meyer

Following the acquisition of Around the World Travel and seven smaller agencies with a combined air volume of $40 million late last month, a group of travel industry professionals has established a base camp from which it intends to reach mega agency heights by year-end.

The next step for the new company, TraveLeaders, is to complete the acquisitions-in-progress of seven more agencies by the end of next month, bringing combined revenues to $400 million. The business plan calls for subsequent U.S. acquisitions that will make it a $1 billion company by year-end and a $2 billion company by the end of next year.

This latest attempt at a midmarket rollup is focused on creating "a horizontally integrated group of travel services companies that would be able to be regionally dominant or niche market dominant throughout the United States," said CEO Keith St. Clair, who noted that the company will offer corporate, leisure, cruise and sports marketing services.

In the next few months, TraveLeaders also plans to launch an e-commerce strategy. "We spent two years getting our brinks together, now we're developing the clicks," said St. Clair. "Electronic delivery is certainly the way of the future and that's one of the reasons why we created this horizontally integrated group. As we bring technology to bear, not only will our distribution costs come tumbling down, we'll be able to support Corporate America's travel policies in a more interesting way."

So far, all of the entrepreneurs who have sold their businesses have reinvested in the common stock of TraveLeaders. "Nobody here has gone to the beach," St. Clair said. "The remarkable thing about this corporation is that we have done this first $40 million deal without one cent of institutional money. All of the equity has come from the travel professionals in the deal, which is unheard of and reflects the commitment of everybody in the group." St. Clair also stressed that each entrepreneur whose business has been acquired has a long-term contract and meaningful P&L center to run going forward.

In addition to the reinvestments, St. Clair said investment capital is coming from the personal funds of the founding shareholders, the executive group and some bank debt.

St. Clair, a U.K. travel agency veteran with 20 years experience who holds controlling interest in the company along with longtime investment partner Doug Lawrence, began developing this acquisition strategy two-and-a-half years ago. That's when they began seeking an appropriate agency to be the launch platform. They decided that Coral Gables, Fla.-based Around The World Travel, "was the best platform company for us to buy," and since they already had some travel agency interests in Central Florida, "it was a strong opportunity for us to build a geographic base," said St. Clair.

The Florida base of operations not only offers a good labor pool for a new reservations and sales center in Tampa and for a res center in Miami, but it also will help support an already strong presence in Latin America.

Unlike previous travel agency rollups, TraveLeaders has begun and will continue as a single unit.

"The difference between us and Navigant and retail travel agency rollup TSI is that we have been able to watch some of the bleeding," St. Clair said. "We took a year and a half with some of the founding companies going through the integration issues. We've already had businesses close their doors and move in with other businesses, working on completing some of the integration issues before we actually paid the money to close the deal."

In addition to Around the World, the small agencies that TraveLeaders has purchased so far are: Travel Leaders International and De Lara Travel of Coral Gables, Fla., Bon Voyage International Travel of Winter Park, Fla., Deluxe Travel of Tampa, CRT Venture Travel of Clearwater, Fla., White Heron Travel Service of Dallas and Squires Travel Services of Philadelphia.

Industry insiders said TraveLeaders may be biting off more than it can chew. Ralph Manaker, executive vice president and general counsel for WorldTravel Technologies, said, "I'm not sure there are enough players left worth buying." He also said it is easy to underestimate how time consuming it is to do the deals, never mind integrating them.

St. Clair said the next round of acquisitions will strengthen its presence in the Northeast and Midwest. "After that, we'll be expanding our presence in Texas and we're actively looking at the West Coast."

TraveLeaders' executive team includes LifeCo and USTravel veteran Marvin Kirchoff as COO and former Budget and Alamo CFO Jim Tolzien as the company's CFO.

St. Clair acknowledged that the new entity could reap significant potential cost savings through consolidation, but "they are small benefits compared to the ability to leverage the volume so that we can give better service to customers.