Manchester-based Clarity Business Travel has acquired fellow U.K. travel management company Agiito from Capita plc for "an enterprise value of £36.5 million on a cash free, debt free basis."
Capita had restated its intention to sell its travel management operation earlier this year, with the sale also including rail booking platform Evolvi.
In a statement Capita said that taking into account the working capital and debt liabilities that Clarity is assuming, Capita expects to receive cash proceeds of £16 million.
Clarity, part of the U.K.'s Portman Travel Group, said in a statement that it expects the deal to complete once U.K. National Security and Investment Act approval has been received, indicating that one or more key government accounts could be among Agiito's customers.
Previously known as Capita Travel and Events, Agiito unveiled its new brand in July 2021 several months after BTN Europe first reported on Capita's planned sale of the company. Its former CEO, James Parkhouse, left the company in April this year.
Agiito's senior management team and employees will remain with the business as it transfers to Clarity, said Capita, and the combined operation will be led by Clarity CEO Pat McDonagh.
"I'm delighted to welcome Donna [Fitzgerald] and her executive team to the business and look forward to working with them to create something truly special for all of our clients. I've known the senior leadership at Agiito for a while and have huge respect for their achievements," said McDonagh.
"Over the coming months we will unite under the Clarity name, leveraging the combined strength of our technology and supplier partnerships. It's extremely exciting and there are huge opportunities for growth for the wider teams of Clarity and Agiito moving forward."
Agiito CEO Fitzgerald in a statement added: "The planned acquisition of Agiito by Clarity is great news for Agiito, our clients and our people. Our businesses are such a great, complimentary fit and their combined strength will be hugely advantageous to our customers. We're looking forward to working with the Clarity team and the wider Portman Group to realise the huge potential this combination brings."
Jon Lewis, Capita CEO, in a statement said: "We are pleased to have agreed the sale of our travel and events businesses to Clarity, following a competitive sale process. The transaction offers significant growth opportunities for the businesses, their clients and colleagues.
"It also marks another significant step towards reducing Capita's debt, as we continue to simplify and strengthen the organisation, and become a more successful business for the long term."
"A Long Process and a Competitive One"
McDonagh told BTN Europe that the two companies have been "talking seriously for more than a year, with a couple of false starts. It's been a long process and a competitive one, so we're pleased to finally get there." He added: "We are two similar companies. We understand each other and our customers because we operate in very similar markets."
The deal more or less doubles the size of Clarity—with 400 Agiito staff and 30 at Evolvi joining Clarity's 400 employees—and will see it achieve a combined total transaction value of more than £700 million by the end of the year, said McDonagh. That would be sufficient to put it among the five largest TMCs in the U.K. and in the top 10 across Europe.
He added: "In terms of hotel spend the acquisition more than doubles it because Agiito has a particular strength in hotels. And from a meetings and events perspective it more than doubles that business too, which we will unite under the Brighter Events brand. It's a really strong, compelling proposition. When it comes to meetings and events, I don't think there are two stronger propositions in the U.K. market right now."
The acquisition of Evolvi was "absolutely central to the proposition," added McDonagh. "It makes us the biggest TMC in U.K. rail. We want to invest in the Evolvi business and to see innovation in the rail space."
McDonagh said there is "no point in pretending there won't be [internal] change" but does not expect to reduce headcount across the combined businesses. "Talent is at a premium, and we have a great desire for talented travel professionals across the [Portman] group. There are naturally going to be some roles that fall away but there are going to be new roles as well. The takeaway for everyone in the business is that this is going to create opportunities rather than remove them. We don't acquire to shrink a business. We acquire with the intention to grow."
The Clarity boss also hinted at significant technology launches later this year: "We made a decision to invest in proprietary technology at Clarity three years ago and come November we'll be making quite a noise about it."
Acquisition Analysis
The two companies each have filed their 2022 accounts within the past five weeks.
Agiito reported revenues of £27.2 million for the 2022 calendar year with a pre-tax profit of £2.4 million, compared with revenues of £11.5 million and a pre-tax loss of £6.4 million in 2021. Agiito said its gross sales for 2022 were £273 million.
Clarity, meanwhile, reported revenues of £21.9 million and a pre-tax loss of £612,000 in 2022 compared with revenues of £8.7 million and a pre-tax loss of £8.7 million in 2021. The accounts also show that gross sales for the year were £271.5 million, up from £87.5 million in Covid-hit 2021. This is lower than the £350 million the company stated in this year's Europe's Leading TMCs submission, which Clarity has noted includes its sports division which it expects to achieve in excess of £100 million in sales this year.
The deal will help reduce Capita's debt. The Agiito accounts show that the subsidiary owed £22.6 million to its parent company in 2022, up from just £256,000 the previous year.
Observers have pointed to the relatively low margins on both sides of the transaction. Is Clarity seeking greater scale in a market where size is growing increasingly important?
The other possibility is the acquisition of a desired asset. The acquisition statement says it requires clearance under the National Security and Investment Act, suggesting that one or more of Agiito's clients may be a key government account.
Originally published by BTN Europe.