The hotel M&A market is back, but some dynamics have shifted. We share below ten tips for those contemplating hotel M&A in 2022.
Impact of invasion of Ukraine. This will be #1 news story for the foreseeable future so both buyers and sellers need to be across the impacts. Even outside of the immediately impacted region that will include issues such as sanctions, impact on workforce and visitors, rising interest rates and share price and currency volatility.
Understand how the pandemic has changed both the positioning of hotels and potential buyers. For instance, a lot of tourist hotels now see themselves as catering to more local traffic. If the full advisory team is not up to speed it causes mixed messages. When thinking about buyers, how would your business drive synergies with their re-imagined businesses?
As a seller, pre-empt answers to the inevitable COVID-19 questions. Every buyer will want to understand how the hotel performed during the pandemic, what government support was received and how employees were affected. Giving those answers first puts a seller on the front foot.
Accept that COVID-19 will be with us for a while yet. As a buyer, demanding COVID-19 walk-away rights is an unrealistic ask for attractive European assets.
Have the accountants on board early. The last 24 months of financials will be hard to read and financial teams will need more time to do their work.
Get creative on pricing and financing terms. Distressed sales are not a material part of the market. Buyers need to find an attractive pricing package.
Think about interest rates. We’ve been living with ultra-rates low for a long time but that era is coming to an end. This will have a major impact on debt financing.
Be ready to explain how an acquisition supports your ESG agenda. Investors, employees and customers will expect there to be a good answer, or may look to apply a so-called “brown discount” to the price.
Consider the impact of the different national strategies on the relaxation of restrictions. For the first time in 40 years, regional differences are growing. Does this provide opportunities to be an early-mover in certain markets?
Get on the plane. Yes, billion-dollar deals have been done by Zoom, but in the hotel sector in particular why miss out on the opportunity to build the all important trust by meeting in person?