Private equity firms serving the technology sector are sitting on $330 billion of unallocated capital, said AGC Partners in a recent research paper.
This so-called ‘dry powder’ is expected to be pumped into hospitality and travel tech companies (with between $50 million and $500 million of annual recurring revenue) over the coming months, enabling firms to increase in scale.
Morgann Lesné, partner at investment bank Cambon Partners, said: “I’m super convinced that PE is a great tool for entrepreneurs to grow their companies while changing shareholders regularly, taking cash off the table, and being able to fund M&A strategy, so I strongly believe in PE in the coming years to help companies grow bigger and bigger.”
There have been several notable deals already this year. Mews, the hospitality technology platform, raised $75 million to fund its expansion in the US, accelerate innovation, and make new acquisitions. The funding was led by Tiger Global alongside existing investors.
Richard Valtr, founder of Mews, said: “Tiger Global’s experience with high-growth technology companies in the US, including Toast, is invaluable as we continue to expand.”
There are several parallels between Mews and Toast. Both companies were founded in 2012 and started with a limited product that they developed into a comprehensive business management platform.
Much of what Mews delivers for hotels, Toast provides for restaurants: an all-in-one cloud SaaS platform that includes point-of-sale, payment processing and inventory management.
Toast has expanded rapidly, especially in the US, and today serves a total of 134,000 restaurants. Toast went public in 2021 with a market capitalization of $20 billion, making it one of the largest IPOs of that year.
So far, Mews has been predominantly based in Europe, serving around 6,300 hotels and reaching a ‘unicorn’ valuation ($1.2 billion) last year.
With a sharp focus on the US hotel market now, Tiger Global will be looking to achieve a similar growth trajectory with Mews as it did with Toast.
PE backed M&A
In a highly fragmented sector, there is a large pool of smaller tech firms ripe for acquisition by larger PE backed platforms. The reasons for M&A tend to be to add new clients, enter new territories, or expand core system capabilities. For example, Mews has bought up local property management systems in Canada and New Zealand, and Atomize, an AI-powered revenue management system.
Another significant deal this year is the sale of Ariane Systems to Jonas Software, the hospitality technology division of Constellation Software Inc (CSI).
Ariane is a 20-year-old Paris-based provider of self-check-in and out systems with 3,000 installations across 29 countries.
Unlike PE firms that typically exit their investments after a few years (Tiger Global exited from Toast at the end of 2024 after three-and-a-half years), CSI operates ‘a buy and hold forever’ business model.
Acquired companies remain in the hands of their original management with CSI only intervening to share best practice and company-wide data. Selling companies must meet several criteria as ‘exceptional’ or ‘good’ businesses as outlined on CSI’s website.
CSI founder Mark Leonard reportedly loves team sports and dislikes the waste inherent in large bureaucratic companies. This informs his belief in the power of small groups working together.
Lesné, who acted for Ariane, commented: “CSI is one of the biggest successful build ups of software companies with a market cap of US$70bn and an estimated 1,300 acquisitions across its six divisions. That’s amazing.”
Business travel consolidation
Corporate travel services are ripe for consolidation. The $570 million merger of two of the largest players in this space – Amex GBT and CWT – has been cleared by the UK’s Competition and Markets Authority but still faces a regulatory hurdle in the US, with a trial to settle the matter scheduled for September.
In January, TravelPerk, a challenger to Amex GBT’s Neo tech platform, raised an additional $104 million led by SoftBank. TravelPerk says its annual booking volume is near $2 billion and the new investment will drive product expansion and acceleration of gross profit through automation and AI.
In another January deal, CDS Groupe underwent a leveraged buyout (LBO) with Andera Partners. This capital restructuring allows Ziad Minkara, Andera’s founder and CEO, to take a majority stake in the company. Andera Partners, along with IDI, a historical shareholder, will support the group's next development phase, particularly in expanding into English-speaking markets.
Founded in 2001, CDS Groupe offers a digital platform to manage the entire hotel reservation chain for business travel, generating savings on direct and indirect purchases. The group operates under the new name S4BT – Solutions for Business Travel. With nearly 450 employees across six European countries (France, Germany, Italy, Poland, Croatia, and Romania), CDS Groupe generates an annual volume of hotel reservations worth €800 million.
Lesné, who brokered the LBO, said preparation is essential when entrepreneurs are seeking growth. He said: “I do ten to 12 deals a year, but I entertain maybe 40 to 50 conversations at the same time. Not every company is at the same stage, and I provide a lot of free advice to entrepreneurs. That’s my way to prospect and find new clients.”
He added: “One of the major mistakes entrepreneurs make is going to market at the wrong moment. You don’t want to go to market too early, if your company is not well prepared. You don’t want to be randomly testing the market. It doesn’t work like that.”
Companies looking to sell up should prepare two to three years in advance by making connections with a selection of prospective buyers, he said: “That doesn’t mean showing you are up for sale, but it means starting a partnership or frequent conversations to make sure they understand who you are and what you do.”
By Ben Walker
