Talking Price Point with Steve Gelsi: Thoma Bravo’s aggressive 15.5x multiple for TravelClick may pay off

Typically, the broad travel business where TravelClick plays doesn’t command such prices. The Blackstone Group’s Hilton Worldwide holding, for example, priced its December initial public offering at less than 10x its projected 2013 EBITDA of about $2.1 billion, derived from its reported EBITDA of $1.6 billion for the first three quarters of the year.

While TravelClick’s customers may be hotels, the New York based service provider falls into two categories commanding much loftier purchase price multiples from buyout shops nowadays: 1) software as a service (SaaS) providers with recurring revenue, and 2) business intelligence and data firms.

In addition to the rising tide around these business sectors, TravelClick has also been posting  EBITDA growth in the high teens as a provider of tools to help independent hotels target potential guests while increasing revenue, cutting costs and boosting performance. Those profits may continue to rise.

“There’s really no other asset in the hospitality space that does what they do at the scale of what they do,” one person close to the deal said. “It’s a unique play on a fast-growing sector and a significant avenue for continued growth by expanding globally, cross-selling new products or adding on acquisitions. There’s a good road map for continued growth.”

Chicago-based Thoma Bravo emerged as one of several bidders for TravelClick in a competitive auction held by Evercore Partners. Initial reports on the deal in January put the value of TravelClick at more than $800 million, but the final sale price came in at $930 million when a deal was announced on March 18.

Thoma Bravo declined to comment on its purchase price multiple. Genstar Capital V LP made a 3.8x return on the deal after holding the firm for more than six years, according to sister website peHUB.com.

It may seem a bit frothy right now, but Thoma Bravo, a specialist in upsizing tech companies, is gearing up to generate a solid return from TravelClick by taking aim at demand for better analytical data in the hospitality technology market.

”We look forward to working with them to continue building on TravelClick’s position as the largest pure play provider of revenue enhancing technology to the hotel industry,” Thoma Bravo Managing Partner Holden Spaht said in a prepared statement.

Complex JLL deal for DPx contains low multiple

Seeking to avoiding lofty auction multiples, JLL Partners embarked on a complex deal to create DPx out of Toronto-listed pharmaceutical manufacturing firm Patheon and a carve-out of Royal DSM’s pharmaceutical services unit. 

The deal was initiated in talks last year between executives at DSM, Patheon and JLL as a way to achieve needed scale in the space. The transaction was then announced in November.

On the way to the finish line, JLL and its team, including law firm Skadden, Arps, Slate Meaegher & Flom LLP, managed to successfully juggle the deal’s take-private, carve-out and joint venture components simultaneously. JLL’s limited partners in an older fund that held Patheon also agreed to the deal and some of them also invested in DPx. JLL’s legal team also included Borden Ladner Gervais LLP and Simpson Thacher & Bartlett LLP.

JLL tapped capital mostly from JLL Partners Fund VI LP, with some participation from JLL Fund V, for its $489 million contribution to the combined company.

The hard work resulted in a purchase price multiple in the high single digits to create a contract drug manufacturer with 8,000 employees and an enterprise value of $2.65 billion, according to a source close to the transaction. The deal closed on March 11, with JLL Partners owning 51 percent and Royal DSM 49 percent of DPx.