Skift Take

Don't you just love those proverbial tuck-in acquisitions? Booking Holdings didn't break the bank for either HotelsCombined ($140 million) or FareHarbor ($250 million). Sometimes making smaller bets is a much smarter strategy than gargantuan deals, but only time will tell.

On the surface, at least, the price tag appears to be underwhelming.

When Booking Holdings announced last month that it intends to acquire Australia-based metasearch company HotelsCombined, the companies did not disclose deal terms, but it turns out the purchase price is $140 million in cash.  That’s probably one of the cheapest deals transacted by a major online travel agency for a metasearch, or comparison shopping, service in recent years. See the chart below.

In a quarterly financial filing, Booking Holdings stated: “In July 2018, the Company signed a definitive agreement to acquire a hotel meta-search company and will pay approximately $140 million in cash in connection with this acquisition.”

The company in question is undoubtably HotelsCombined, which would come under the Kayak umbrella within Booking Holdings. The deal is expected to close later this year. It likely didn’t disclose the price at the time of the announcement for competitive reasons, and that it was deemed not material to the company’s operations.

Asked about the $140 million deal price and whether it shows that HotelsCombined is struggling, Kayak co-founder and CEO Steve Hafner said: “Online travel is a scale game. Just because other folks overpay for M&A morsels doesn’t mean we paid too little. And $140 million is a nice number for a business that never took outside capital, especially when converted to Australian dollars.”

Crunchbase lists privately held HotelsCombined as having taken about $3.6 million in funding since 2015. The company was founded in 2005.

Major Metasearch Acquisitions 2013 to Present 

Meta Buyer Year Deal Type Price
Kayak Booking Holdings 2013 cash/stock $1.9B
Skyscanner Ctrip 2016 cash/stock $1.7B
Trivago Expedia Group 2013 cash/stock $634M*
Momondo Group Booking Holdings 2017 cash $555.5M
HotelsCombined Booking Holdings Pending cash $140M

* Note: Expedia Group bought a 63 percent majority stake in Trivago for $634 million in 2013. Expedia still controls Trivago, but spun it off into a public company in 2016. 
Source: Public filings

FareHarbor Bought for $250 Million

In the same financial filing, Booking Holdings also revealed that it paid about $250 million in cash and stock for tours and activities software provider, FareHarbor. As with HotelsCombined, Booking Holdings didn’t publicize the purchase price for FareHabor when it announced the deal in April. Skift reported in April that Hawaii-based FareHarbor did about $50 million in revenue in 2017, and that TripAdvisor had previously offered to buy the company for $200 million.

FareHarbor is a software-as-a-service company. Crunchbase published an analysis showing that such companies in 2018 were selling at multiples of trailing 12-month revenue of around 4.5x, which would put the Booking-FareHarbor transaction right in that comfort zone.

Booking Holdings-HotelsCombined Deal

As the above chart shows, Booking Holdings bought three metasearch outfits, namely Kayak ($1.9 billion), Momondo Group ($555.5 million) and HotelsCombined ($140 million and pending), since 2013 and was the most-active metasearch buyer among the major online travel agencies in that period.

In the metasearch arena, Booking Holdings CEO Glenn Fogel has decided to double down in the category — even as he dials back his own company’s marketing through competitors’ metasearch units.

Booking Holdings CEO & President Glenn Fogel Is Speaking at Skift Global Forum. Register Now

When Booking announced the deal to buy HotelsCombined, some analysts wondered what the rationale might be since Kayak already has a presence in Asia Pacific, which is HotelsCombined’s home region. Kayak is flight-heavy, though, and HotelsCombined likely penetrated some markets where Kayak hasn’t broken through.

Analysts speculated last month that the deal might have occurred for $250 million to $300 million, which turns out to be an overestimate.

It’s hard to analyze the pros and cons of the Booking-HotelsCombined deal since the hotel-metasearch company is privately held, and there is scant public information about its performance. It would be premature anyway since it would take years to decide whether the transaction was sage or folly.

HotelsCombined has been around for more than a dozen years. When asked, Hafner of Kayak said, “they are not struggling or on their last legs. We paid a fair price and are looking forward to their continued success.”


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Tags: booking holdings, fareharbor, hotelscombined, kayak, m&a, mergers and acquisitions, metasearch, tours and activities

Photo credit: Priceline CEO Glenn Fogel (L) appeared at the Skift Global Forum in New York City September 26, 2017. In the second quarter, Booking Holdings announced deals to acquire FareHarbor and HotelsCombined. Skift

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