Phocuswright Europe: Travel firms debate the pros of cons of going public versus private equity

Going public can be a way of enabling a firm to focus on the long-term and retain independence, leading travel firms told last week’s Phocuswright conference in Dublin.

Fabio Cannavale, co-founder of Bravofly Rumbo, which bought before rebranding as group, said following its 2014 IPO the management still controls a majority of the firm.

And Feargal Mooney, Hostelworld’s chief executive, said private equity investors are ultimately looking for an exit with a return on investment and will take a relatively short-term view.

Hostelworld completed a £180 million IPO last year having had two separate periods under private equity ownership.

“Private equity investors are looking for an exit, and typically operate on a four to five year cycle and want a return. A lot of people think public markets are hard but private equity’s not easy,” said Mooney.

“Private equity firms are investing for a fixed period of time and they are running investment to maximise return over that period of time rather than longer term.

“Public markets probably bring back a little bit of autonomy to allow management to focus a little bit longer term.”Cannavale agreed, saying: “One thing that the public market is, is a way to stay independent . We still, along with the management have a majority of the company. It’s way of having an exit.”

South African OTA Travelstart followed a different path, earlier this year taking a $40 million investment from Amadeus Capital Partners.

Chief executive and owner, Stephan Ekberg, said: “You come to a stage in your evolution when you say are we really growing and doing the best that we can here.

“The answer was no. I felt that we needed more input, we needed to be challenged. And we needed to find the right partners for that.

“We came to a road’s end and said ‘what do we do?’ Do we sell the company or raise money? We went to the market and started to look at what was out there.

“If you want to raise money and continue to be in the game then everything is about who you partner with. Do you want to be single the rest of your life or get married?”

Ekberg added that investment revitalised the firm and was taken as an endorsement of what it was doing.

He said sometimes it feels like the firm was swimming with sharks in the market given the number of large competitors it has.

“The good thing with sharks is they go blind when they bite, apparently. We are trying to use that to our advantage.”

Asked about the rigour of public scrutiny of public firms, Cannavale said lastminute prepared for two years for the float and chose the Swiss stock market because it requires biannual reporting.

“The only problem with markets is they are short-term focused while we are long-term focused,” he said.

Mooney said analyst probing came with the territory and although he never saw himself running a public company with the share price up 40% after six months everything was good.

He said it was important to deliver consistently and also to manage market expectations. “The more you can talk to them [analysts] and set expectation the easier it is,” he said.

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