American Express Global Business Travel's (GBT) planned
acquisition of Hogg Robinson Group (HRG) will give the company advantages in
geographic footprint, leverage with suppliers and more money to invest in
The acquisition will also create opportunities for competing
travel management companies (TMCs) to court GBT and HRG customers during the
GBT was No. 3 on Travel Weekly's 2017 Power List, with $31.1
billion in 2016 sales, trailing only online giants Expedia Inc. and Priceline
HRG was No. 6, with $16 billion in sales. BCD Travel ($24.6
billion) and Carlson Wagonlit Travel ($22.4 billion) sit between the two
companies in the Nos. 4 and 5 spots, respectively.
GBT offered up to 410 million pounds, around $576 million,
to buy HRG.
"For American Express, it was a no-brainer to do this,"
said Phocuswright analyst Claudia Unger.
GBT will benefit from HRG's more established presence in
Europe, making it easier to court clients there through people who have a
greater understanding of the market, Unger said.
Jack Mannix, founder of Jack E. Mannix & Associates,
agreed that the acquisition makes geographic sense, considering GBT's strength
in the U.S. and HRG's more global presence.
"It's easier to go in and buy market share in certain
markets, rather than try to peck away at it for a decade," he said.
In a joint statement, GBT and HRG said the acquisition would
enable them to use "complementary footprints" to better serve clients
as well as to advance technology offerings, maximize efficiencies across the
business and reap cost savings and scale benefits. Both companies declined
further comment about the deal, which is subject to regulatory approvals. It is
expected to close in the second quarter.
The expanded company will enjoy benefits when it comes to
vendor relationships, as well, according to Henry Harteveldt, founder of
Atmosphere Research. Combined, GBT and HRG will have more clout with GDSs,
technology vendors and the like. When it comes to suppliers like airlines and
hotels, the larger company will likely have advantages, but they could be
tempered by client preferences.
"I think they were both large, but the larger you are,
certainly the more clout and leverage you have with vendors," Harteveldt
In a statement, GBT CEO Doug Anderson also pointed to
technology as another benefit of the acquisition, promising "a superior
client and traveler experience through fully integrated travel management
The combined company will undoubtedly have more money to invest
in technology, Harteveldt said, something that is crucial to travel managers.
But first, it must get through the phase of combining two
large companies under one umbrella.
Unger predicted, "It's going to cause a lot of
upheaval, obviously, to get the systems talking to each other, to decide which
people are going to be there or not. And all that is going to have an impact on
service, I would think."
Keeping 100% of prior clients is unlikely, Harteveldt said,
but the combined company will be tasked with keeping as many as possible.
Defections would be more likely on the HRG side, he said.
Meanwhile, competing TMCs are taking notice.
Mannix said that if he "were one of their competitors
out in the marketplace, yeah, I'd be leveraging a little bit of fear factor
without making it too obvious. I would certainly use it as an opportunity to
say, 'You may have been happy with your HRG relationship or with your Amex
relationship. There are going to be some changes here. How about giving us a
Carlson Wagonlit declined to comment on the acquisition, and
Flight Centre Travel Group (No. 7 on the 2017 Power List, $14.4 billion in
sales) said it had no plans to change its focus or strategy.
BCD Travel, however, said it was ready to take advantage of
the acquisition on several fronts, including a monetary benefit from the sale.
BCD Travel's parent company, BCD Group, is owned by John
Fentener van Vlissingen. He is also the owner of Boron Management, a private investment company that holds just under 24% of Hogg Robinson's equity.
BCD Travel president and CEO John Snyder said, "Obviously, our owner is going to get a nice distribution of funds from this acquisition, and there's no doubt some of those funds will end up back in BCD to help us with our growth plan and with our investment strategy for the future."
Snyder said BCD had often considered acquiring HRG, but it never felt like the right fit culturally. BCD is growing through other acquisitions, however, and plans to continue to do so.
With GBT's acquisition of HRG, BCD is positioned to court potential clients that might be unhappy with the acquisition.
"We think this is probably a scenario where there will be a fair amount of opportunity, and we're preparing ourselves for that," Snyder said.
BCD will also be on the lookout for potential talent who may be available following the acquisition. GBT estimates job reduction of around 6% to 8% as a result; GBT has some 12,000 employees worldwide, and HRG has around 14,000.
If the acquisition goes as planned, it will likely be the harbinger of more consolidation among the top TMCs.
"I highly doubt there will be a combination of the big three -- ourselves, CWT or Amex," Snyder said. "But I'm sure, if you ratchet down to the next tier, there absolutely will continue to be some level of consolidation over the coming years."
Harteveldt predicted that the HRG acquisition will pressure other TMCs to look to mergers and acquisitions, especially those in the middle tier.
"The problem is that once the largest TMCs get to a certain size, acquisitions become problematic, whether from a regulatory standpoint or the fact that adding other agency groups provides diminishing value," he said. "So it will be interesting to see whether this triggers a cascade of other mergers-and-acquisition activity among other TMCs, especially on a geographic basis where that may occur."
Correction: The last third of this report was cut off in the initial version.