April 23, 2024

Amex GBT/CWT deal: Industry reaction

American Express Global Business Travel has agreed to buy CWT in a deal worth approximately $570 million and expected to close in the second half of 2024.

The move sees Amex GBT continue on its path to dominate the global TMC sector, following its purchase of Egencia from Expedia in 2021 and its acquisition of rival Hogg Robinson Group in July 2018.

Paul Abbott, Amex GBT’s CEO, said CWT has around 4,000 clients across energy, marine, media, entertainment, sports, government and other sectors. He said these “verticals” are more complex, have more value and tend to have higher levels of customer retention, and are where Amex GBT also has a footprint.

Abbot said more than a third of CWT’s business comes from SMEs, which will increase Amex GBT’s SME business by about 35% and will increase sales by about $5 billion.

Industry reaction

Scott Gillespie, Industry Advisor at tClara, said the “strategic acquisition of CWT at a low price not only makes sense for its shareholders but could also benefit others in the industry”.

Speaking to The Business Travel Magazine, Gillespie said the deal gives Amex GBT:

  • subject-matter expertise and relationships in desirable market segments
  • transaction scale much needed for training AI models
  • a viable counterweight to Concur’s booking tool dominance
  • an ability to set a price umbrella for large-account transaction fees
  • a mandate to usher in scalable technology-driven automation
  • a mission to crack the code for winning unmanaged accounts.

But he added: “It is far from a basket of roses. Beyond the risks of a messy integration and business model disruption, there is the wild-card risk of climate change. Specifically, companies of all sizes could accelerate their Scope 3.6 carbon reduction goals.

“Should this happen, air transaction volumes will drop significantly across Europe and North America. The size of this risk will become clearer as we get closer to 2030.”

Some industry observers questioned whether the deal will get regulatory approval, but Cory Garner, CEO of Texas-based consultancy firm Garner and an advisor to global airlines and travel tech start-ups, said he did not believe it would be seriously challenged or blocked by antitrust regulators.

“In our view it is too difficult to narrow the market’s definition to only the global, legacy TMCs. The corporate travel management market has seen new entry from next-gen TMCs like Navan, AmTrav, TravelPerk, Spotnana and others and is under new pressure from airline distribution strategies to attract corporate travellers to their own website,” he said.

But he believes there will certainly be some “raised eyebrows” among airlines, hotels, smaller competitors and large multi-national clients since “the largest legacy by far is acquiring one of its only global competitors”.

Shrinking pie

In a LinkedIn post, Garner concluded that Amex GBT is “acquiring a bigger piece of a shrinking pie and faces significant downside risk on volume forecasts and technological nimbleness”.

He said the success of the deal relies on a number of assumptions, none of which Garner subscribes to, including that the current legacy TMC commercial model, which depends largely on revenue from airline commissions and GDS financial incentives, can continue indefinitely “and potentially become even richer in the face of rapidly-changing airline distribution strategies”.

He also questioned whether nearly all CWT clients will be happy to remain with GBT through a “potentially messy transition” and “notwithstanding the possibility that at least some of them chose CWT precisely to avoid GBT”.

Economies of scale

Morgann Lesné, investment banker and an expert in travel technology M&A from Cambon Partners, said of the deal: “Business travel is more than any other market a volume play: for the customers, for the suppliers.

“Size is the only way to make economies of scale and get to relevant levels of profitability. The acquisition of CWT by Amex GBT will put increasing pressure on the likes of Travelperk and Navan, both of  which will have to fight even harder to get to that level of scale that a giant like Amex GBT-CWT is about to become.

“More generally the deal is yet further proof that 2024 will turn out to be the biggest ever year for M&A in the travel technology space. A wave of inevitable consolidation following Covid needs to take place whilst at the same time high interest rates have stalled start-up fundraising, leading to people having to merge or face closing.

“Meanwhile record tourism figures for 2023 and a very positive outlook for 2024 are leaving many players feeling confident that now is the right time to acquire competitors. Watch this space for more news.” 

amexglobalbusinesstravel.com; mycwt.com