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TravelClick has a huge customer base in the hotel industry, but needs to reinvent itself. That’s going to take a lot of investment, but it’s unclear if there is a buyer out there who wants to take on that burden and risk.
TravelClick, the hotel business intelligence and technology provider, is up for sale with an $800 million asking price, but some prospective buyers are balking at the valuation.
The fact that TravelClick has resorted to an auction process, being carried out by Evercore Partners, in itself is a signal that its sale process hasn’t been going so well.
Acquired by private equity firm Genstar Capital in December 2007, TravelClick initially went through a more orthodox sales process, putting out a book, and failed to find a buyer. One of the suitors that got cold feet is rumored to have been Oracle.
Skift spoke with a handful of sources about the status of Travelclick’s auction, and it appears that numerous companies have submitted bids, and several are actively going through the due diligence process. TravelClick declined to comment for this story.
Private equity firm KKR is said to be one of the potential suitors for TravelClick, which is seeking an approximately $800 million valuation. That number doesn’t appear to be outrageous given the fact that Moody’s pegs TravelClick’s 2012 revenue at $257 million, although the potential price tag has raised eyebrows in some quarters.
One source said TravelClick is believed to have done about $300 million in 2013 revenue, notching around $70 million in EBITDA.
Standard & Poor’s a year ago said TravelClick had a “stable” outlook, and forecast “good revenue growth and consistent profitability.”
Still, TravelClick faces some stiff challenges against competitors, including hotel reservations system provider, Sabre’s SynXis, which is believed to be making market share inroads, as skeptics point out that TravelClick is saddled with legacy technology and seems to be focusing on profitability for a sale instead of investing in new products and innovation.
“TravelClick has a highly levered balance sheet and its capital structure is all screwed up,” says one source familiar with the company. “How are they going to delever all of that debt service, and what is the core asset?”
Another source skeptical about TravelClick’s prospects says, “I think it’s more of a no-growth scenario, and the capital that’s going to be required to update its technology, specifically its iHotelier central reservations system.”
TravelClick’s investors clearly are fatigued and looking for an exit as the process bumbles along.
Says one source: “All I can say is that there are lots of lookers, and it seems the closer they get, the less they like what they see.”