Priceline's acquisition of Momondo strengthens Kayak in regions where it had less market share, including the UK, Nordics, and Russia. Keeping Momondo out of the hands of a rival, or a potential one, also protects the Kayak brand and Priceline as a whole.
Earlier this week, we launched the latest report in our Skift Research service, A Deep Dive Into Priceline’s Competitive Position in Travel 2017.
Below is an excerpt from our Skift Research Report. Get the full report here to stay ahead of this trend.
Unlike when Ctrip acquired Skyscanner, which was already quite profitable, Priceline buying Momondo was a much different type of acquisition. In 2016, the Momondo Group generated 90 million pounds in revenue with a 45 percent growth rate. However, it spent heavily on marketing and technology to grow, leading to a negative 9.6 percent operating margin. The pound has been volatile, but using the 2016 year-end rate of 1.23, revenue in U.S. dollars would have been $111 million.
This means that Priceline purchased the Momondo Group for just under five times 2016 revenue. Looking at 2017, assuming a growth rate between the 45 percent in 2016 and 20 percent, the forward multiple would have been in the 3.5 to 4x range. These multiples are much lower than the 6 to 8x range we have seen in the industry. After the OpenTable writedown, Priceline is clearly being patient on acquisitions and that paid off with a premium brand at a discount price.
Momondo Group Financials in Great Britain Pounds
Momondo Group Financials in U.S. Dollars
Source: Company Filings, Skift Estimates
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Photo Credit: Momondo Group CEO Hugo Burge at Skift Forum Europe in London on April 4, 2017. Burge left the company after the Priceline Group acquired it. Skift