Private Equity now dominates ownership of Global Travel Distribution companies

Implications: All four GDS companies are now operating on a similar playing field, all owned by private equity companies.

Cost cutting and surfacing operating efficiencies is generally the order of the day for the companies purchased by private equity firms. 

The industry is watching with a careful eye to see the impact of TPG and Silver Lake's purchase of the Sabre Group.



Analysis: The four global distribution system companies (Amadeus, Galileo, Sabre and Worldspan) all had the same genesis - ownership by the airlines.  

Three of the four companies (Sabre, Amadeus and Galileo) went public in the late 90s.  

In 2001 Cendant Corporation purchased Galileo, then in the summer of 2006, Blackstone purchased Galileo and the balance of the Travelport organization.  During Cendant’s ownership of Galileo there were significant reductions in headcount and offshoring of key functions, including development and customer service.

Worldspan was the last of the GDS companies to shed 100% airline ownership, being purchased by Citigroup Venture Capital and Teachers’ Merchant Bank in March of 2003.   Worldspan scrubbed their expenses post acquisition and some say perhaps went too far, in that they were then faced with the announcement that two of their largest customers, Expedia and Priceline were going to begin shifting bookings to Sabre and Amadeus.

In December of 2006 Worldspan and Travelport announced a merger.  The two firms are waiting for regulatory approval.

In 2005, Amadeus was purchased by Cinven and BC Partners, although three of its founders, Air France, Lufthansa and Iberia still hold on to just under 45% of the company.  Amadeus seemed to have escaped the cost cutting ax, which may be characteristic of the European private equity approach, particularly for an industry leading company that is acquired.

The latest acquisition, originally announced in December 2006 is that of Sabre Holdings.  Today the transaction was completed, following an affirmative vote by Sabre’s board and shareholders yesterday.   

All four companies still provide some level of financial reporting, but it will be increasingly difficult to find the level of detail that has previously been available.