Recent deals in the experiences tech space — such as the Rezdy-Checkfront-Regiondo deal, and Respax acquiring Livn — created high expectations in the mergers and acquisitions space. However, for tour and activity companies themselves, there’s a slowdown right now within the North American market, suggested by a mid-season pulse survey of U.S. operators by Arival and experts from Chenmark.
The July 2023 survey of more than 120 operators across North America and Europe found that just half of U.S. operators say their business is up in the first half of 2023. In comparison, operators in Europe are doing better; four in five say business is up over 2022.
Despite this, Trish Higgins – partner at Chenmark, a family-owned holding company that focuses on buying businesses from owner-operators when they want to retire – says that it’s never too early to start preparing a tour company business for sale. Business owners should, however, consider how the market conditions might impact their prospects.
Higgins shared her insights on the current acquisition environment for tour and activity operators in North America with Arival, as well as some tips for operators on preparing to sell, in advance of her sessions at the upcoming Arival 360 | Orlando, which takes place next month.
“North America is in the wake of its post-pandemic revenge travel boom”, Higgins explains, “which brings uncertainty about whether booking levels will continue to remain strong — or cool off, as Arival’s recent mid-season pulse survey of U.S. operators suggests it might.”
“With bookings cooling off and economic uncertainty on the horizon, sellers may want to sell, but buyers are cautious,” explains Higgins. “2022 business numbers may be good, but results of 2023 through June might be lower. I can see us having a bit of a standoff situation for the rest of the year, with buyers taking a “wait and see approach” to how 2023 results reflect the “new normal.””
Even so, the survey suggests that there are some companies that may be more appealing to potential buyers. Travelers are looking for unique experiences, and so the companies that offer them may hold up even amid wider uncertainty in the market.
“People are still willing to spend on those special experiences, and I think that that is a shift: even if people are giving up spend elsewhere, they’re still going to value those things,” observes Higgins. “So I think that people offering a special experience are holding up and will continue to hold up,” and thus because travelers value them more, potential buyers might, too.
“Everywhere people go now they want to have an experience, so everywhere there’s more opportunity in those areas.”
Higgins offers her top tips for those considering a sale – both in the near or distant future:
It’s better to be prepared than not – Even if it’s not something you want to do or you’re even thinking about, the more you prepare the better the outcome will be if you have. What you don’t want to do is find yourself in a situation where… health issues come up or things happen, and you have to sell your business, but you haven’t really been thinking about how you should be setting things up.
Get the house in order – Keep your financials in order (so you can easily send them to a prospective buyer) and train your staff to help run the business (so you ensure the business can continue without you) — this is simply good business and will help if and when you’re ready to sell.
Consider who you might want to sell to – investing in relationships with those people now — even years in advance — will make the process of finding the right buyer if or when you do decide to sell that much smoother.
Consider what your business might be worth – learn about the types of frameworks people use for valuing a business. There are multiple frameworks that can be used to determine how much your business is worth, such as the value of your assets, and the multiple of profits or multiple of revenue. Ultimately, valuing a business is an art not a science. At the end of the day what two people agree on as the value is the value.
Chenmark’s Trish Higgins will be leading breakout sessions about the current investment, merger and acquisition environment in the experiences industry, and how to prepare to sell — or buy — a tour business at the upcoming Arival 360 | Orlando in October.