Conducted numerous valuation methodologies and thorough research for a company in the Travel Services industry looking to enter into the M&A market. Placed as one of four finalists out of more than 30 teams and presented out pitch to a panel of William Blair partners.
3. Executive
Summary
Executive Summary
3Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Potential BuyersValuation Ranges
ValuationPositioning
Sell-Side
Advisory
Ø Industry-wide push for consolidation
and technological booking
Ø Kona is positioned to be an industry
leader with strong management and
convenience factor
Ø Valuation analysis places the enterprise
value for Kona betweenthe range of
$640mm - $680mm
Ø 2016E Revenue:$206.2mm
§ 8.7% growth from 2015
Ø 2016E EBITDA: $52.6mm
Ø Analysis leads to a recommendationof a
sale to astrategic buyerwith:
§ large international presence
§ corporate focus
Ø Mid-marketbusiness share,unique
growthsegmentsand customer retention
rate can provide synergies
Positioning
Analysis
550 590 630 670 710
Comparables EV/EBITDA
Precedent Transactions
LBO Analysis
DCF Exit Multiple
DCF Perpetuity Growth
5. General Outlook
Industry
Trends
Company
Overview
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
5
Ø Companies originally focused on costing trips by segment
Ø Have since switched to costing trips as a whole
Ø Kona’s platform is ideal for these costing strategies
LeisureTravelVolume
Recent Sector Growth Costing Strategies
(Inmillions)
Data via Statistia
Ø Stagnant business spending following 2008
Ø Business travels have grown steadily
Ø Consumer discretionary spending has grown more rapidly
-6%
-4%
-2%
0%
2%
4%
0
500
1000
1500
2000
-6%
-4%
-2%
0%
2%
4%
0
100
200
300
400
500
BusinessTravelVolume
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%(Inmillions)
(CAGR)
(CAGR)
Travel Expenditures as % of GDP
6. Consolidation andTech
Industry
Trends
Company
Overview
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
6
Millennials
0
20
40
60
80
100
2014 2015 2016E 2017E 2018E 2019E
(Inmillions)
Trips Booked viaTravel Apps
Millenials
Recently
implemented ERP
systemplaces Kona as
an industryleader
moving forward
Consolidation
Ø Hotel and airline industries have seen consolidation
Ø Travelagencies streamline booking process for consumers
Ø Kona will benefit from these new conglomerates
Ø Beneficial to Kona’s business platform
Ø More perceptive to loyalty incentives
Ø Find booking burdensome
Ø More likely to alternate between airlines
75%
47%
Travel App UsageWhen Booking
Non-Millenials
Data via Boston Consulting Group
8. Company Overview
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
8
2016E Sales by End MarketIndustry Leader with Expanding Opportunities
Product Portfolio
45%
25%
20%
10% Small to Medium
Business
Large Corporations
Personal (Luxury)
Local Business
Airfare Accommodation
2013-2016E Sales
CAGR: 6%
Hotel Booking
2013-2016E Sales
CAGR: 10%
Transportation Services
2013-2016E Sales
CAGR: 4%
Entertainment Planning
2013-2016E Sales
CAGR: 27%
Partnersships
55% of 2015 Revenue 25% of 2015 Revenue 10% of 2015 Revenue 10% of 2015 Revenue
Ø Provensuccess in corporate and personal luxury travel
§ Initiated expansion of vacation services
Ø Recent expansion into Asian markets
Ø Use of proprietary and licensed digital products
§ Ideal placement as the industry becomes more price sensitive
Personal
(Luxury)
was just
5% in
2011
Positioning
Analysis
GrowthTrends
EBITDA(inmillions)
EBITDAMargin
20%
21%
22%
23%
24%
25%
26%
27%
28%
29%
0
10
20
30
40
50
60
70
80
90
2013 2014 2015 2016E 2017E 2018E 2019E 2020E 2021E
9. Ø High debt requires a greater
increase in revenue
Ø Lack of exposure to high-growth
international markets
Ø Reliance on partnerships to
maintain low prices
Ø Increasing digitization will
create more price sensitive
market
§ Lowers the ceiling for
revenue growth from
price increases
Ø Leisure travel cyclicality
Ø Leveraging current relationships to
achieve the best prices
Ø First-time sales may pull in new
business and increase brand
recognition
Ø Digitization to simplify process and
retain customers
SWOTAnalysis
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
9
Ø Full travelexperience covering all
ends of travel
Ø Strong partnerships keep overall
product quality high
Ø Business travelis not as cyclical as
leisure travel
S W
TO
Positioning
Analysis
12. Company Name
Ticker &
Exchange
Price Enterprise Value Equity Value
LTM
2016E EBITDA
LTM EBITDA
Margin
Enterprise Value
Revenue EBITDA LTM Revenue LTM EBITDA 2016E EBITDA
TravelZoo TZOO US $12.00 $138.6 $166.1 $134.6 $11.3 $12.8 8.4% 1.0x 12.3x 13.0x
WebJet LTD WEB AU 9.02 836.1 1,158.5 110.7 27.0 63.0 24.4% 7.5x 31.0x 18.4x
Hanjin Kal Corp 180640 KS 14.43 1,254.6 852.7 723.7 94.4 75.5 13.0% 1.7x 13.3x 11.3x
MoneySuperMarket.com MONY LN 339.89 1,846.7 1,862.0 438.4 168.8 151.1 38.5% 4.2x 10.9x 12.3x
Kakaku.com Inc 2371 JP 17.34 3,545.2 3,778.4 364.4 182.1 243.5 50.0% 9.7x 19.5x 15.5x
Kona Adventures 189.7 46.5 52.6 24.5%
High 3,545.2 3,778.4 723.7 182.1 243.5 50.0% 9.7x 31.0x 18.4x
3rd Quartile 2,695.9 2,820.2 581.0 175.5 197.3 44.2% 8.6x 25.2x 17.0x
Median 1,254.6 1,158.5 364.4 94.4 75.5 24.4% 4.2x 13.3x 13.0x
Mean 1,524.2 1,563.5 354.4 96.7 109.2 26.9% 4.9x 17.4x 14.1x
1st Quartile 487.3 509.4 122.7 19.1 37.9 10.7% 1.4x 11.6x 11.8x
Low 138.6 166.1 110.7 11.3 12.8 8.4% 1.0x 10.9x 11.3x
Comparable Companies Analysis
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
12
ImpliedValuation RangeAnalysis Notes
Ø Used multiple foreign companies due to the large size of most
U.S. travelconglomerates
§ The multiples from these smaller companies are more
accurate as to where Kona should be valued
Ø Other notable U.S. comps:TripAdvisor, Expedia, Priceline
Positioning
Analysis
Kona Adventures 2016E EBITDA $52.6
Comparable Multiple Range 12.7x 13.3x
Enterprise Value Range $665.4 $697.0
13. PrecedentTransactionsAnalysis
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
13
ImpliedValuation RangeAnalysis Notes
Ø Majority of deals in the LTM were performed by strategic buyers
Ø Significantly higher multiples have surfaced when one travel
conglomerate buys a smaller, growth-driven travel company
§ i.e., (Priceline-KAYAK, Expedia-HomeAway)
Positioning
Analysis
Kona Adventures 2016E EBITDA $52.6
Precedents Multiple Range 12.5x 13.5x
Enterprise Value Range $657.5 $710.1
Hotels.com
Hotwire.com
trivago
HomeAway
Orbitz
Travelocity
Venere.com
3 Others
Priceline.com
Booking.com
OpenTable
KAYAK
Rentalcars.com
Agoda.com
Target Company Acquirer
Transaction
Type
Announcement
Date
Transaction Value Premium
Transaction Value
Revenue EBIT EBITDA
Homeinns Hotel Group BTG Hotels Group Co Ltd Strategic 12/8/15 $1,137.4 16.5% 1.8x 22.6x 9.0x
Club Mediterranee SA Multiple acquirers Sponsor 9/12/14 1,258.9 15.2% 0.7x 69.3x 12.0x
Kuoni Reisen Holding AG EQT Partners AB Sponsor 2/2/16 1,351.3 25.0% 0.4x 16.6x 10.0x
KAYAK Software Corp Priceline Group Strategic 5/22/13 1,659.6 24.9% 5.9x 35.6x 30.2x
HomeAway Inc Expedia Inc Strategic 12/16/15 3,014.1 23.2% 6.2x 88.0x 44.5x
Orbitz Worldwide Inc Expedia Inc Strategic 2/12/15 1,595.5 26.5% 1.7x 19.5x 11.4x
High 6.2 88.0 44.5
3rd Quartile 6.0 74.0 33.7
Median 1.8 29.1 11.7
Mean 2.8 41.9 19.5
1st Quartile 0.6 18.7 9.7
Low 0.4 16.6 9.0
14. Discounted Cash Flow
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
14
ImpliedValuation RangesAnalysis Notes
Perpetuity Growth
EBITDA Exit Multiple
Growth Assumptions:
Ø High growth is both organic and inorganic
Ø Peaks in 2018E, management’s end projection year
WACC Assumptions:
Ø All assumptions based on comparable companies
Positioning
Analysis
*Based on comparables
WACC Calculation
Book Value of Debt $126
Market Value of Equity* 674
Total Capital $800
Beta* 1.1
Market Risk Premium 8.6%
Risk Free Rate 1.8%
Cost of Equity 11.2%
Pre-Tax Cost of Debt* 7.5%
Tax Rate 40.0%
Cost of Debt 4.5%
WACC 10.2%
Estimated Projected
2016E 2017E 2018E 2019E 2020E 2021E
EBITDA $52.6 $60.6 $66.6 $75.2 $77.8 $79.8
Less: D&A (0.5) (0.5) (0.6) (0.6) (0.7) (0.7)
EBIT 52.1 61.1 67.2 75.8 78.5 80.5
Taxes 20.8 24.1 26.4 29.8 30.9 31.6
NOPAT 31.3 37.1 40.8 46.0 47.6 48.8
Plus: D&A 0.5 0.5 0.6 0.6 0.7 0.7
Less: CapEx (0.7) (0.6) (0.7) (0.6) (0.7) (0.7)
Less: Change in NWC - - (5.0) (1.4) (2.4) (0.1) (0.1)
Unlevered Free Cash Flow $31.1 $32.0 $39.3 $43.6 $47.5 $48.7
Present Value of Projection Period $26.4 $29.4 $29.6 $29.3 $27.2
2021E Unlevered Free Cash Flow $48.7
Perpetuity Growth Rate 2.5% 3.0%
Enterprise Value Range $575.1 $611.4
2021E EBITDA $79.8
EBITDA Exit Multiple 10.5x 11.5x
Enterprise Value Range $632.7 $680.0
15. Leveraged Buyout Analysis
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
15Positioning
Analysis
Capital Structure
ImpliedValuation Range and Return MetricsAnalysis Notes
(InMillions)
Ø Low CapEx creates strong free cash available for debt repayment
Ø Strong qualitative drivers combat cyclicality and can spark future
growth
Transaction Assumptions:
Ø Debt/EBITDA Purchase Multiple: 5.5x
Ø Purchase/Exit Multiple: 11.0x
2016E EBITDA $52.6
EBITDA Multiple 10.5x 11.5x
Enterprise Value Range $552.4 $605.2
Investor Return Metrics*
IRR 28.4%
Cash-on-Cash Return 2.4x
*Based on transaction assumptionslisted left
$0
$200
$400
$600
$800
$1,000
2017E 2018E 2019E 2020E 2021E
Equity Debt
16. Bear Case Scenario
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
16Positioning
Analysis
Rationale
Ø Management has bullish forward projections for growth
Ø Decreased discretionary spending would hinder our projections
Ø Terrorist attack
Ø 2008
Ø Political uncertainty
Comparative Metrics
Ø Modeled reduced management projections to long run
Ø Our implied valuation of $598.4mm - $620.3mm decreases
our enterprise value by 7.6%
Commentary
2021E
$0
$50
$100
$150
$200
$250
$300
$350
Revenue EBITDA
Standard
Bear
ImpliedValuation Ranges
570 590 610 630 650 670 690
Bear Case
Standard
7.6%
17. Ø Actions should be taken to brace for this scenario
Ø Three ways to protect our growth segment
PreventativeActions
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
17Positioning
Analysis
Suggested courses of action
Discounts to
extend business
trips into leisure
trips
Discounted rates
to book multiple
trips at once
Create a point-
based system for
our luxury travel
segment
Help attract millennials and
retain them in our luxury
segment
Discounts and simplicity
would entice customers while
securing future sales
Business clients are more
likely to havecontinued
discretionaryspending in
downturn—likely to
continue extending trips
19. Potential Acquisition
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
19
Implied MetricsPotentialTarget
Why Now?
Positioning
Analysis
Description
Metrics
Rationale
Privately Held
Rhino Africa Safaris is an agency that books individual and
group safari trips in Africa.
Ø Great opportunity if we believe discretionary spending
will continue to increase
Ø Grow entertainment planning segment
Ø Expand geographically
Ø Our IT expertise will benefit them greatly
Ø Establish connections with upper-class citizens
As Is
With Acquisition
Ø Revenues have been damaged the past fewyears by Ebola
paranoia—need to capitalize before metrics recover
Ø Increasing demand for African safari trips
2017E
Revenue
2021E
Revenue
2017E EBITDA
Margin
2021 EBITDA
Margin
$224.7 $306.8 27% 26%
$233.8 $325.4 30% 27%
2021E EBITDA $91.3
Enterprise Value Range $676.6 $709.6
20. Strategic Buyer Universe
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
20
Description Metrics Rationale
Ctrip.com International provides online travel
agency services for consumers as well as services for
corporate travel management headquartered in
Shanghai.
Airbnb operates an online marketplace for travelers
and residents looking totemporarily rent out their
house.
JetBlue Airways Corporation provides low-cost
airline flights. It is headquartered out of John F.
Kennedy International Airport in NewYorkCity.
Carlson Wagonlit Travel provides travel management
services, including: travel bookings, program
management and security services, for mostly large
corporations.
Direct Travel is anonline travel services agency that
focuses primarily on scheduling business travels and
meetings. They alsoprovide vacation travels.
LTM Revenue: $2,274.3 M
Market Cap: $21,239.5 M
Privately Held
(EstimatedIPO value of ~$30B)
LTM Revenue: $6,585.0 M
Market Cap: $5,594.1 M
Privately Held
Privately Held
Ø Strong M&A activity inthe global marketplace
Ø International placement complimenting Kona’s
expansion goals set in place by management
Ø Opportunity for Kona to add lodging services to
their repertoire
Ø Expansion route into the lodging market
Ø Opportunity for Kona to add cruise line services
to their repertoire
Ø Able to get a leg up on competition
Ø Impressive opportunity for synergies that allow
Kona to penetrate the large corporation customer
base
Positioning
Analysis
Ø Strong international focus and M&A activity
Ø In need of a stronger digital presence
Ø Two-way synergies
21. Financial Buyer Universe
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
21
Reasoning Reasoning
Ø $250mm - $2,500mm EV investments
Ø Geographic expansion opportunities
Ø Willingness to work with Kona’s current
management team
Ø Expertise across severalindustries
Ø Strong team with organic and inorganic
growth strategies
Ø Impressive track record through current
and past investments
Ø Focused on building high growth
companies and shows proven success
Ø Buy-and-build investment approach
Ø Severalstrong synergy opportunities
through currently held portfolio comps
Ø Heavy focus on software companies
Ø Pick-and-place management opportunities
Ø Strong qualitative growth opportunities
available to create value for Kona
Ø Severalsecured commitments across
Europe and Asia
Ø Able to help Kona with global expansion
goals that management has set in place
Ø Traveloriented investment criteria
Ø Numerous synergy opportunities with
current portfolio companies
Ø Bear case scenario alternative for Kona
Positioning
Analysis
Ø Numerous investments in the leisure
industry, a growing industry for Kona
Ø Extremely strong team with an
impressive track record throughout
investments
Ø Business service focus historically
Ø Operationally focused helping organic
and inorganic growth
Ø Strong synergy opportunity with MNX
22. Best Fit Buyers
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
22Positioning
Analysis
Ø Thomas H. Lee Partners is focused on creating organic growth
and inorganic growth through acquisitions
Ø Work with management teams to provide forward guidance
rather than replacing them
Ø Business services is one of the their three primary sectors
Ø Kona meets criteria for strong cash flow and secular growth
Ø DirectTravelhas a strong international presence,expanding
our geographic boundaries
Ø Key synergies:
§ Greater exposure to international markets
§ DirectTravelgets access to our eventplanning segment
and industry relationships
Ø DirectTravelhas been acquisitive lately
24. FinalThoughts
Industry
Trends
Valuation
Analysis
Strategic
Options
Final
Thoughts Appendix
Executive
Summary
24Positioning
Analysis
Valuation Ranges
Why DirectTravel?Recommendation
After analysis of potential synergies and recent market activity,
recommend a strategic sale to DirectTravel
SuggestedTime
Frame
With consumer discretionary spending high, the recent multiples
being paid for travelservice/travelservice acquisitions and a
plausible bear case, recommend a sale early2017
Ø Heavy international presence would
help Kona’s expansion
Ø They would expand by integrating our
entertainment planning segment
Ø Our established industry relationships
will lead them to retain management
550 570 590 610 630 650 670 690 710
Comparables EV/EBITDA
Precedent Transactions
LBO Analysis
DCF Exit Multiple
DCF Perpetuity Growth
