Agency Mergers and Acquisitions

Jeffrey Miller, Travel Attorney We continue to receive inquiries from our clients regarding mergers and acquisitions. While we have had several clients either close their doors or merge with other agencies, we also have a number of clients throughout the country who are actively exploring possible acquisi

By: Jeffrey Miller, Travel Attorney

We continue to receive inquiries from our clients regarding mergers and acquisitions. While we have had several clients either close their doors or merge with other agencies, we also have a number of clients throughout the country who are actively exploring possible acquisitions. In our experience, there are very few actual mergers, despite how these transactions might be labeled in press releases or the trade press. In fact, they are really acquisitions where one agency acquires the assets of another. If you’re on the fence about merging or acquiring (or being acquired), here are a few tips:

" If it is an acquisition, will it be a stock or an asset purchase? In almost all instances, we recommend an asset purchase, where the buyer takes selected assets and no liabilities.

" Is the seller going to stay and be active in the business? This is generally very important for a smooth transition. We recommend that this be done through either an employment agreement, an independent contractor agreement, a consulting agreement or some combination thereof.

" Which GDS contract does the purchaser have? Hopefully, it is different from that of the seller’s. Generally, the buyer would not assume any liability under the seller’s contract, absent special circumstances.

" How many segments are being generated through the GDS system? This is an important issue to address. If the systems are different, the buyer may obtain bonus payments from its existing vendor for converting the segments.

" What increase in revenue/profitability can be obtained by shifting business to preferred providers? This analysis should be undertaken to determine whether the buyer can receive additional revenue by moving business to its preferred providers.

" How long should the process take? The entire process, from the time the agency is identified until closing, should be no more than three to four months.

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