Latest Sandler Capital News
Jun 16, 2020
Accelya , an airline services tech company, has agreed to buy Farelogix , an airline technology vendor. The companies didn’t reveal deal terms, or the price that asset manager Sandler Capital Management accepted for selling its ownership stake. Accelya, based in Barcelona, booked about $200 million in revenue last year, mostly for services to airlines. It provides financial, commercial, and analytics tools to more than 200 carriers. Farelogix, which helps about 25 airlines including American Airlines and Lufthansa sell and distribute plane tickets and related products, made $42 million in revenue in 2018 , the last year it revealed a figure. Travel technology company Sabre had attempted to buy Farelogix for $360 million but the UK Competition and Markets Authority blocked the deal in April, alleging antitrust issues. Sabre gave up its pursuit later that month, as the transaction became one of several deals fallen victim to the pandemic’s hit to travel sector revenues . Vista’s Long-Term Bet on Airline Tech “Vista has made a super-long investment in Accelya, and now in Farelogix’s tech,” said CEO of Accelya John Johnston. “We have a sizable war chest.” Farelogix isn’t a typical investment for private equity. Due to the pandemic’s crushing of airline revenues, Farelogix lack the cash flow that private equity typically relies upon to pay down debt to afford a deal. Vista, a firm with more than $50 billion in technology investments created by chairman and CEO Robert Smith, has made a so-called “perennial” capital investment fund. This fund doesn’t require it to sell assets within a fixed period of, say, a decade. Accelya and Farelogix are the first portfolio companies for this small fund. “Vista’s primary objective is to grow over the long-term,” said Farelogix CEO Jim Davidson. “That’s a very different prospect from what’s true with other [private equity] funds. I think that’s going to resonate extremely well with our customers and the industry at large.” Farelogix, which has 304 workers today, hasn’t had reductions and doesn’t expect to with the acquisition, Davidson said. Vista has had a pattern of taking a hands-on approach to the dozens of companies it has acquired. It usually expects them to follow about 100 best practices it has developed to squeeze out revenue and margins. In some cases, that means writing more code faster with fewer bugs. In others, it means adopting more efficient sales processes. Long-Term Vision Accelya has a revenue management system that helps airlines decide what fares to charge by the seat according to supply and demand signals. It competes in that market with solutions from PROS (Pricing and Revenue Optimization Solutions) , a cloud software company, and from the in-house tech that airlines have built. Accelya wants to use Farelogix’s tech to reinvent its revenue management system. The revamped system would encompass the dynamic pricing and bundling of ancillaries, such as packaging a seat upgrade and free checked luggage with a ticket. One of Accelya’s most-used services focuses on financial billing, reconciliation, and settlement of transactions. “We see airlines more tightly controlling how they sell ancillaries, and with that trend comes phenomenal complexity,” Johnston said. “If you start doing dynamic bundling and pricing of products, those products may all be paid for at the booking, but they’ll be consumed at different points in the journey and different tax jurisdictions,” Johnston said. “So it opens up a nightmare from an accounting perspective, and solving that is the bread-and-butter of Accelya.” The company now wants to build “an order accounting module” that simplifies the complexity of tax reconciliation for individual products and services. Accelya helps settle payments, such as between an agency and an airline, for the vast majority of interline tickets — or tickets involving flights among cooperating airlines — sold worldwide today, the company said. “One of the biggest headaches we’ve had at Farelogix is how to manage the settlement of interline tickets for offers generated through the new distribution capability , including for ancillary sales across codeshares,” Davidson said. “We’ll be able to solve many problems now that we can link the back-end with the front-end, so to speak.” Accelya also wants to build and release more sophisticated refund management tools using Farelogix’s tech though those tools may not appear until next year. Quick Deal Accelya began talks to get Farelogix five weeks ago, shortly after Sabre gave up its pursuit. It believes it can close its transaction within the next few months. “We don’t overlap in any single part of our portfolio, and we’re not competitive today,” Johnston said. “So we don’t expect any problems with regulators.” Many airlines have had a concern about companies whose motivations they question buying tech vendors they use. For example, a few carriers pushed regulators in the U.S. and Britain to investigate Sabre’s acquisition of Farelogix, according to Skift’s reporting. But airlines may be less fearful of Accelya. “Typically, the industry tends to interpret things as having to ‘pick sides,'” Davidson said. “But here, there are no sides that need to be picked.” Most of Accelya’s and Farelogix’s services work with passenger service systems offered by Amadeus, Sabre, and TravelSky. If the transaction closes at a timely pace, Accelya expects to have its systems integrated with Farelogix’s by year-end. See full article
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23 Team Members
Sandler Capital has 23 team members, including current Chief Financial Officer, Steven Gary Warshavsky.