Skift Take

The best bets on where Amadeus would acquire a business are hotel and airport tech and software services. But pricey valuations of many target companies are eye-watering right now.

Amadeus said on Friday it’s in a strong enough financial position to consider acquisitions despite the crisis, an unusual disclosure even if the pandemic does present buying opportunities.

During an earnings call on Friday, the Madrid-based travel technology company said it would shop for businesses. Worries about exceeding a certain ratio of debt wouldn’t prevent it from acquiring a business if a boost to long-term growth could justify the deal.

The willingness to entertain talk of acquisitions suggests Amadeus feels positive about its ability to weather the shifting storm of the coronavirus pandemic.

The main headwind for closing an acquisition currently is price, Maroto said. Company sale prices have remained high despite the pandemic. That makes it trickier for the company to find bargains with a high probability of generating growth.

“Independently of the fact that we haven’t found anything concrete to tell you today, the prices are pretty high, despite the crisis,” Luis Maroto, president and CEO.

“The multiples on company values are high,” Maroto said. “So we will, if we go ahead with any M&A, we’ll need to be really sure that we can create value and pay the right price for that.”

An analyst noted that Amadeus had historically avoided deals that pushed its debt load above approximately one-and-a-half times net debt to earnings, before interest, taxes, depreciation, and amortization.

“We need to find the right balance between opportunity and leverage,” said. “If we find the right opportunity and we can justify that in terms of value creation, we are not going to wait until we reach a [debt-to-earnings] level to really go ahead with any acquisition.”

Amadeus has in recent years focused its acquisitions on plugging gaps in its faster-growing “new” business lines, such as airport IT and hotel software services.

“So will M&A be part of our future strategy and growth? The answer is yes,” Maroto said. “But then we need to see the right company at the right price.”

In its first-quarter financial results that Amadeus reported Friday, the company recorded approximately $598 million (€496.7 million) in revenue. That was down sharply from the comparable pre-pandemic first quarter of 2019 when the company generated roughly $1.57 billion (€1.49 billion) in revenue.

Amadeus had a first-quarter loss of about $115 million (€95.3 million) against profits of approximately $350 million (€298 million) in the same quarter in 2019.

Amadeus implied that it lost some share in air bookings against rival Sabre in the quarter. It didn’t release a market share estimate in this quarter as it has done in the past when it was gaining share.

Maroto acknowledged that Amadeus has relative weakness to its competitors in the air market in North America which had an impact on its share in that region in the period.

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Tags: amadeus, earnings, gds. global distribution systems, global distribution systems

Photo Credit: Madrid's Gran Via, photographed in 2010. Madrid-based Amadeus reported first-quarter 2021 earnings on May 7. Madrid Convention Bureau