The upcoming Budget has triggered significant merger and acquisition (M&A) activity in the travel industry, driven by tax concerns. Industry experts are witnessing an unprecedented volume of transactions, underscoring the sector’s recovery and appeal to investors. With private equity involvement increasing, the impact of potential tax hikes is a major concern. Industry stakeholders are racing to finalise deals before the fiscal deadline.
The anticipation of the Chancellor’s Budget on October 30 has catalysed a surge in merger and acquisition (M&A) activity within the travel sector. This is fuelled by apprehensions that there might be an increase in taxes on these transactions. Chris Photi, Head of Travel and Leisure at White Hart Associates, indicated that the period leading to the Budget has been ‘hectic’, with activity levels never seen before, describing the situation as ‘off the Richter scale’.
Private equity firms, having accumulated significant capital, are actively seeking investments to leverage the recovery post-Covid-19. Many small-business owners who were unable to sell during the pandemic are now entering the market. An example of such activity is seen in Soho Square Capital’s investment in Newmarket Holidays earlier this month, facilitated by regulatory guidance from White Hart.
Travel Trade Consultancy director Martin Alcock observed that numerous private equity firms are eager to progress with acquisitions, prompted by looming changes to the Capital Gains Tax (CGT). The expected alignment of CGT rates with income tax, potentially elevating taxes to 45%, has injected urgency into deal completions, particularly where Civil Aviation Authority approvals are concerned.
While the Budget may not necessarily halt investment activity, Rick Jones, a corporate finance partner at PwC, predicts a continued trend of deals in the coming years. Loveholidays, currently seeking a £1 billion valuation, exemplifies potential high-profile market entries driven by investor confidence in the sector’s growth trajectory.
The travel sector’s robust recovery and investor interest indicate a promising future, pending regulatory outcomes.