Wednesday, February 21, 2007

How much did IgoUgo cost Sabre

In the comments section of a post on Webjet's Planit/Panitonearth plans a discussion started on the valuations of other UGC based businesses such as Expedia's TripAdvisor and Sabre's IgoUgo. Anon posited that IgoUgo was sold for $600mm - which is clearly too high a figure. Sabre never disclosed the amount paid for IgoUgo. Sam Daams of Travellerspoint just posted a comment on my earlier post that gives some good insight so I will re-post it here

I did a bit of research and here are two articles that I think definitely put the 600 million number to rest. More likely under 10....

From Sabre Holdings Q4 earnings report:
" As a reminder, we consolidated the IgoUgo business into Travelocity during the third quarter, which put a $4 million drag on Travelocity operating income for the year. "

From a google groups thread
" I know recently IAC acquired Tripadvisor and sometime last year Sabre Holdings acquired IgoUgo. I posted a couple of weeks ago asking about any details on the Tripadvisor deal and the answer was really fascinating. Any ideas about how IgoUgo was evaluated and how much it was acquired for?

First of all, make it a habit to research SEC filings whenever you have a question concerning finances of a publicly traded company. If it's anywhere, it's in the company's annual report (form 10-K).

In this case, however, this approach doesn't quite work; Sabre's 2005 10-K lists two acquisitions in 2005, SynXis ($41 million) and ($1.2 billion). This probably means that whatever Sabre paid for IgoUgo was immaterial (accounting word for "too small to mention"). Sabre's 2005 10-K also lists acquisitions made in 2004 and 2003; the smallest acquisition mentioned, that of Sweden-based RM Rocade in 2004, is $15 million. So my guess would be that IgoUgo was acquired for significantly less than $10 million.

Jim Donnelly and Tony Cheng, IgoUgo founders, had this to say on the subject:

...over the past few years we've tossed around many big ideas for IgoUgo but lacked the resources to implement them. With the financial backing of Sabre, however, promises to grow into the site we've always known it could be. This acquisition affords us not only access to Sabre's extensive distribution channels and content sources, but also the funds to
pursue longtime goals like faster site performance and the development of new kinds of content.

Note that site performance is cited a problem that couldn't be solved by any means other than acquisition by Sabre, which probably means that prior to the acquisition IgoUgo was growing out of its existing Internet infrastructure, but couldn't afford an uprgade... Not a good position to be in when negotiating a sale, and another sign of relatively low purchase price...

Second, valuation of a growing company is a complicated exercise. Structuring an aquisition is even more complicated. Very few people will tell you any details, especially since pre-acquisition discussions are usually covered by confidentiality agreements."

Thanks for the comments Sam

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