The travel industry is experiencing a significant surge in mergers and acquisitions driven by fears of increased taxation.
- Chris Photi from White Hart Associates highlights a dynamic October, with unprecedented deal activity in the travel sector.
- Private equity firms are eager to invest, especially in businesses unable to sell during the Covid pandemic.
- There is widespread speculation about potential capital gains tax increases, prompting a flurry of deal completions.
- The Civil Aviation Authority’s involvement adds complexity, with changes of ownership requiring careful regulatory navigation.
The travel sector is currently witnessing an upsurge in mergers and acquisitions as the date for the Chancellor’s Budget approaches. This heightened activity stems from a pervasive anxiety within the industry regarding a potential hike in taxes, as indicated by Chris Photi of White Hart Associates. With a marked increase in the volume of transactions, the industry is preparing for what promises to be a hectic October.
Addressing an audience recently Chris Photi remarked that the level of activity is extraordinary, stating, “We’ve seen a frenzy of all types of transactions. It’s off the Richter scale.” This sentiment reflects the palpable urgency among private equity firms eager to deploy capital into the travel sector, particularly targeting businesses that found no buyers during the Covid crisis.
Furthermore, there is a looming concern about potential adjustments to Capital Gains Tax (CGT). Martin Alcock of Travel Trade Consultancy points out a sense of panic about possible increases in CGT rates, which could align with income tax percentages, potentially reaching up to 45%. This speculation has incited urgency among investors, who are motivated to finalise deals before the Chancellor’s announcement on October 30.
The regulatory landscape adds another layer of complexity, especially with the Civil Aviation Authority’s significant role in transaction approvals for ATOL holders. The requirement for financial arrangement assessments post-ownership change can delay proceedings, and the Authority has reportedly paused considerations while processing ATOL renewals in September, further intensifying time pressures.
Notably, Rick Jones, a corporate finance partner at PwC, suggests that the current wave of mergers and acquisitions may extend beyond the immediate pre-Budget period. Speaking recently at the Travel Convention in Greece, Jones predicted a sustained trend of M&A activities over the next few years, with companies like loveholidays actively pursuing significant market valuations.
The travel industry’s current M&A wave reflects both immediate tax concerns and longer-term investment confidence.
