Ben Edwards, vacation rental management and vacation rental company mergers and acquisitions veteran of Weatherby Consulting, walked a room full of professional management companies of various sizes through some best practices for selling a vacation rental management company.
This is what he covered:
The Vacation Rental M&A Climate
Mergers and acquisitions activity has risen in recent years in conjunction with the overall growth of the vacation rental industry. Bids are forthcoming from large companies such as Vacasa and Wyndham Vacation Rentals as well as smaller local and regional companies. Given the demand and the drastic changes underway with vacation rental technology and distribution, many mature management companies are putting themselves on the auction block.
M&A Best Practices
It is important to commit to the end goal of an asset sale upfront, follow a timeline, and process to that end replete with “needs, wants, and non-negotiable” deal points. An expert like Weatherby can advise the proper disposition timing for a specific company owner’s needs, be it with the end goal of a close date just prior to or post peak season.
Similar to how properties can be managed by amateurs but often only achieve optimal performance by leveraging professionals, an owner can market her company for sale individually but may find the outcome on the lower end of the valuation spectrum (i.e., 3-5 times annual adjusted earnings) in so doing.
It is suggested that a company owner work to position the company for sale well in advance by focusing on the brand’s goodwill and reputation (on OTAs and in the community), management contract retention, growth potential, operations processes, and the quality of its financial reporting.
In that process, a quality team of advisors, accountants, and attorneys experienced in vacation rental company dispositions should be consulted and made ready to assist should a qualified buyer be found.
For those looking to grow their businesses, now is a great time to do that through acquisitions—especially as the acquiror likely has plenty of capital on hand from years of growth.
The downside, of course, is that many other management companies have grown their earnings in recent years.
Furthermore, there is consolidation in the industry being driven by national and international companies who are driving up prices for those companies and their owner contracts. Assuming a company has run its operations well and positioned itself for a sale, 2016 is a great year to sell.
Companies not willing to jump into the frenzied acquisition space should consider deploying their capital into organic growth strategies such as Rented.com, direct mail, and referral programs.
Want to see more from the VRMA Eastern Summit? Check out our other articles from the event: