Following its March acquisition of travel management company TraveLeaders, Travel Acquisitions Group—the former Carlson Leisure Group—aims to replicate its franchised corporate travel business through multiple business-travel-focused acquisitions, investment in corporate travel technology and a transition to a majority business travel operation.
TAG was formed following a January management buyout from parent Carlson Cos. TAG's overall operations, which include wholly owned operations, 305 franchisees under the Carlson Wagonlit Travel Associates banner, 830 Results Travel franchisees and ProQuest Travel Group, account for $6 billion in sales, half of which are generated by corporate travel, said TAG chairman and CEO Mike Batt.
Franchise operations now reside in TAG's Travel Franchise Group and average 60 percent to 70 percent of their business from its corporate accounts, which Batt claims comprise 3 percent of the total U.S. corporate travel market. As part of the buyout agreement, Minneapolis-based TAG can use the Carlson Wagonlit Travel brand for up to three years.
Coral Gables, Fla.-based TraveLeaders, a 65 percent corporate agency that claims $223.3 million in 2007 sales, was purchased from publicly held American Leisure Group for a cash payment of $6 million, plus another payment of up to $8 million, according to London Stock Exchange filings. In 2007, TraveLeaders earned a before-tax profit of about $1.7 million on revenue of $18.6 million, according to ALG. As of the end of February, TraveLeaders' net assets totaled about $427,000.
TAG plans acquisitions in the small and midsize corporate travel market, similar to the TraveLeaders buy. "If they are substantial ones like TraveLeaders, I would expect potentially another two by the end of the year," Batt said.
In February, TAG tapped Lehman Brothers veteran J.D. O'Hara as senior vice president of corporate development, charged with handling TAG's merger and acquisition activity for both company-owned and franchised agencies.
"We are in the process of raising a substantial amount of capital right now and once we've raised that money, we will want to apply it astutely on our own behalf and our franchisees' behalf," Batt said. "Because there is so much room to grow, we intend to make acquisitions and also help them to make acquisitions and have set aside some capital for them to do that."
Although Batt said the company still will attempt to aggressively grow its call center business, which annually fulfills about $1 billion in reservations, and a $500 million cruise booking business, the emphasis is on the corporate market, where there is less investment volatility.
"It's easier for us to buy corporate agencies than leisure agencies," Batt said. "There is less risk involved because you have a higher possibility of losing clients when you buy leisure because they tend to go with the agents. Corporate clients tend to mostly stick with the agency."