An acquired TASTE

Mergers and acquisitions among TMCS continue unabated, but why is it happening and what does it mean for clients? Gillian Upton reports

Charles Darwin’s theory of natural selection published in 1869 may not have had universal acceptance from many naturalists at the time but his theory of evolution – that only the strong survive – couldn’t be a better metaphor for the world of TMCS today.

To say that there has been movement in the TMC marketplace is to underplay just how many travel management companies have disappeared recently. One industry observer reckons ten have either been bought or acquired over the last two years alone, including HRG, Giles Travel, Hillgate,

Portman, Amber Road, Ian Allan Travel and Business Travel Direct. We also know that Diversity Travel will be up for grabs in 2020 – a surprising announcement – and they certainly won’t be the last to seek a suitor.

“Smaller players who don’t own their own technology will be vulnerable,” reckons Jill Palmer, Managing Director of Click Travel. “I can imagine four or five of those changing hands in the next 18 months.”

Few believe that further consolidation will touch the 'big three' – Amex GBT, CWT and BCD – so the money is on the independents who need scale to thrive; those with a turnover under £100million.

“Consolidation raises the bar for entry into the world of TMCS,” says Tony Mcgetrick, VP and Director of Sales and Marketing at BCD. “It takes a long time and deep pockets. We’re in 109 countries for example.”

Too many players

At well over 100 in number, there are too many TMCS operating in the UK, something not replicated in other countries, including our continental European cousins in the larger business travel markets of Germany and France. A cull is certainly in order for the health of the entire industry. In Darwinian terms, only TMCS with favourable adaptations will survive and that is exactly the strategies being employed. The step-change in the market – chiefly around new technology and distribution flows – is the major trigger as scale is more important in times of disruption.

Michael Valkerich, VP Global Customer Group for CWT, says: “Scale creates advantages so there is always going to be a current of acquisitions. The larger players do better when new changes come along as we can exert more authority.”

Some TMC owner-managers are reaching retirement and are looking for an exit route, while others can no longer support their business structures, particularly in light of the huge investment required to develop or acquire new technology. Some become financially vulnerable when they lose a large spending client, the most recent example being Amber Road when it lost the BT account. The ever-decreasing income from the GDS as the airline distribution landscape evolves is another nail in their coffin.

Dave Bishop, Commercial Director at the acquisitive TMC Gray Dawes, believes there are other strategies at play: “Consolidation can shortcut the R&D route to acquire the technology required as CTM did when it purchased Redfern. TMCS can take out a competitor and change the market dynamics, as Amex GBT did when it