The Inside Story Behind Expedia's Purchase of HomeAway

Expedia Inc.'s initial bid for HomeAway was $35 per share on October 8 and Expedia temporarily walked away from the negotiations four days later when HomeAway countered that it wanted a number in the $40s. After nearly a month of back and forth talks, the two sides agreed on an imputed value of $38.31 in the $3.9 billion cash and stock deal with HomeAway's board of directors unanimously approving the deal on the afternoon of November 4 and the two sides announcing the agreement after the stock market close later that afternoon as HomeAway published its third quarter earnings. Along the way, Company A informally expressed an interest in acquiring HomeAway in November 2014, and companies B, C, and D discussed making their own strategic investments in HomeAway from May to August 2015 but none ultimately made an offer. An alternative transaction and commercial agreement from Company F got serious consideration from HomeAway in late October 2015 but HomeAway concluded that the proposal would not have been in the interests of HomeAway's shareholders. Were the Priceline Group, TripAdvisor, or Google among the interested parties engaged in the process or kicking the tires? That's anyone's educated guess. Expedia and HomeAway revealed the background to the deal, as required, in a Securities and Exchange Commission filing November 16 [see the full text of the Background of the Offer and the Mergers below]. As is customary, the only interested party mentioned by name was the successful bidder. The merger agreement concluded a nearly three-year process, which began in February 2013 when HomeAway engaged Qatalyst Partners to begin discussions about the merits of a possible sale scenario. One of the big takeaways from the SEC filing is that HomeAway concluded it faced substantial risks as a standalone business considering its push to get to 100 percent online booking from vacation rental owners and managers, and the introduction of a travelers' service fee. An acquisition, such as the one concluded with Expedia, would mitigate some of that risk because of all of its technical and financial resources. Although five companies other than Expedia expressed an interest in investing in HomeAway or proposed an alternative transaction, only one, Expedia, made a full-blown acquisition proposal. That may say something about HomeAway's prospects, the very competitive marketplace in the vacation rental space and the broader sharing economy. A couple of ot