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On December 18, 2013, Amadeus announced that it had reached an agreement to acquire Newmarket International for the nice round sum of half a billion dollars. Industry observers unanimously perceived this announcement as a big deal, demonstrating a massive commitment by Amadeus, known primarily as a Euro-centric GDS player, to the hotel technology space. With this investment of $500 million, Amadeus bought the Newmarket International management team, product portfolio, expertise in the Force.com platform, $110 million in revenue and an installed base of 22,000 hotel properties.
After congratulating the good people at Newmarket for the transaction, the next thought that came to mind was to explore the various reasons one company might choose to buy another, or why a company would agree to be acquired.
The accompanying table (page 54)is not intended to be an exhaustive list of mergers and acquisitions in the hospitality technology space. Rather, it illustrates several things:
- Mergers and acquisitions in this space have been occurring for a long time at a pace of about two per year since 1995.
- Acquirers that buy once tend to buy again, with several firms appearing three, four or even five times on this list.
- Acquired companies tend to be privately held, often sold by a founder that is moving on (Springer-Miller, Visual One, Encore, EZYield, among others).
- Acquiring companies may or may not be public companies (Infor, SAS and as of this writing, Sabre Holdings all private; MICROS, Agilysys and PAR Tech public, with Pegasus having been public when it was in acquisition mode).
- Companies usually prefer to not disclose the terms of an acquisition deal unless they have to.
There are numerous reasons why these transactions occurred. Far and away the most common rationale is the strategic acquisition of a company with products that are complementary in some way to the acquirer’s existing portfolio. Most of the acquisitions in the table below fit this description. This includes the numerous acquisitions by Infor, executing on its broader strategy of growth by acquisition.
Many of Infor’s acquisitions could be characterized as taking a competitor off the table and consolidating the market. Certainly the roll-up strategy of the PMS acquisition by Softbrands, later acquired itself by Infor, fit this description. MICROS’ acquisition of POS vendor HSI is another example.
Another class of strategic acquisition involves making a choice to enter a new market: PAR's acquisition of Springer Miller was a strategic entry to a new market. When Agilysys bought Inter-American Data (LMS) in 2004, it made a conscious choice to enter the hospitality technology vertical market. That decision spawned later acquisitions of Visual One, Infogenesis and EATEC. SAS chose to enter the hospitality vertical with the IDeaS purchase.
Some acquisitions are opportunistic, seeking to take advantage of a unique situation. I would classify LodgeNet's recapitalization out of bankruptcy by Colony Capital as such.
Then there are purely defensive acquisitions. One example was Starwood Hotels & Resorts' purchase of the Hotel Systems Division of Geac Computers. If Geac went out of business, or sold the division to someone that would shutter or milk it only for support revenue, then Starwood’s many hotels on the system would be in trouble. Another example, IBS Plc. acquired HBSi to resolve an account receivable for development services.
One thing is certain, all acquisitions are different and bring their own complexities and impacts on the customers and employees.
The data in this table was assembled from a broad range of sources. Any errors are the author’s alone. While the author accounted for as many applicable transactions as possible, some transactions may be missing due to space constraints.
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