When mergers go awry, it isn't always merely because the acquired company was a dog. Sometimes the purchaser likewise screws the whole thing up.
Arthur Kosten, a former Booking.com chief marketing officer, was talking about the time in early 2005 when Priceline.com’s then-deals guru Glenn Fogel visited Bookings’ Amsterdam office to begin discussions about acquiring the company.
“So essentially Priceline came by,” Kosten recalled as part of The Oral History of Travel’s Greatest Acquisition: Booking.com. “Glenn Fogel is a great guy, who did all the right acquisitions when everybody did the wrong acquisitions.”
See the chart below, which supports Kosten’s statement.
There’s a lot of truth to Kosten’s statement about Fogel’s skill in identifying, and Priceline.com picking up, the UK’s Active Hotels in 2004 and the Netherlands’ Bookings B.V. a year later for less than $300 million for both. The deals helped catapult Priceline from a second-tier player — actually number three in the global online travel pecking order at the time — to Booking Holdings’ current leading stature as a roughly $100 billion company.
Read the Booking.com Oral History Now
Fogel and team haven’t always been so savvy, it would appear. For example, regardless of how the Booking Holdings $2.6 billion acquisition of dining reservations platform OpenTable in 2014 eventually turns out, it appears the buyer overpaid. In 2016, Booking Holdings took a $917 million writedown on the OpenTable deal. Was the OpenTable deal Fogel’s baby? Was it former Booking Holdings CEO Darren Huston’s pet project or, as is usually the case, a team decision? We’ve heard talk that Booking Holdings former CEO and current chairman Jeffery Boyd inspired and led the OpenTable deal.
But, regarding Kosten’s point about companies making the so-called “right” and “wrong” acquisitions, which are not always so neatly defined, during the middle half of the 2000s, it is worth noting that while Priceline’s acquisition of Bookings produced roughly $88 billion in value for the parent company, a trio of other deals by rivals Cendant, Sabre/Travelocity, and Expedia sparked massive losses for the buyers, as shown in the chart below.
3 Lousy Deals While Booking.com Acquisition Was Fantastic
|Acquirer||Target||Year Bought||Purchase Price||Year Sold/Shut||Final Value||Loss/Gain||Loss/Gain|
|Cendant||eBookers||2004||$372 M||2006||$80-$90 M||-($285) M||-(77%)|
|Priceline||Bookings.com||2005||$135 M||N/A||$88 B||$88 B||65000%|
|Sabre||LastMinute.com||2005||$1,075 B||2015||0||-($1075) B||-(100%)|
|Expedia||Venere||2008||$340-$390 M||2016||0||-($365) M||-(100%)|
Source: Skift Research and public documents
ebookers Was a Negative for Cendant and Later Orbitz
For example, New Jersey-based Cendant acquired Europe’s ebookers for $372 million in 2004. At one point, Cendant owned travel distribution businesses Galileo, Orbitz, Trust International, Travelport, and ebookers, among others, and sold them to private equity firm Blackstone in 2006 for $4.3 billion.
Skift Research estimates that ebookers, which operated a series of European online travel websites, many with disparate technology platforms, saw its value plummet from that initial $372 million purchase price to $80 million to $90 million based on impairment charges prior to the sale to Blackstone. Ebookers had been a drag on Cendant’s earnings, and later on Orbitz Worldwide’s financial results for years. Orbitz Worldwide went public in 2007, and counted ebookers among its brands.
In the third quarter of 2008, Orbitz reported a net loss of $287 million that would have been a slight profit were it not for a $297 million impairment charge related to the assets, including ebookers, that Orbitz inherited when Blackstone’s Travelport spun Orbitz into a public company in July 2007.
Expedia Group currently owns ebookers, which landed in Expedia’s hands when the company bought Orbitz Worldwide in 2015.
LastMinute.com Was No Bargain
In 2005, the same year that Priceline bought Bookings, then-Travelocity parent Sabre acquired the UK’s LastMinute.com for $1.08 billion. In 2014, Bravofly bought LastMinute.com, a shell of its former self, from Sabre for GBP 2, along with agreeing to assume LastMinute’s liabilities and to use Sabre global distribution system services.
At the time of Sabre’s purchase of LastMinute.com in 2005, it had been a leading brand in the UK with a really nice and perky brand reputation. Sabre neglected the brand technology-wise, as former Travelocity CEO Michelle Peluso acknowledged in Skift’s 2016 Definitive Oral History of Online Travel, while Booking.com flourished.
Read Some of the Booking.com Oral History Now, Some Later
Venere Was A Bust
Seeking to keep up with Booking.com’s agency model — or pay at the hotel solution — in Europe, Expedia acquired Italy’s Venere for an estimated $340 million to $390 million in 2008. Priceline.com had looked at a deal for Venere and walked away, as outlined in Skift’s latest oral history.
Venere never did much for parent company Expedia in trying and failing to help it catch up to Booking.com. Expedia retired Venere in 2016 without fanfare.
There’s a lot to getting mergers and acquisitions right or wrong. It’s all about capitalizing on trends, paying a decent price, synergies, and often there’s a lot of luck that’s involved, too. Many mergers get bogged down and fail despite the initial deal hype.
Booking Holdings has largely done very well with its acquisitions, although no company can always get them right.
Skift Research Senior Analyst Seth Borko contributed to this report.
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Tags: booking holdings, booking.com, ebookers, expedia, lastminute.com, oral history, travelocity
Photo credit: A LastMinute.com pop-up store in Covent Gardens in London, UK, in March 2009. Sabre bought LastMinute.com in 2005, and didn't make the merger work. Ian Kershaw / Flickr.com