Despite - or perhaps because of - the recession, M&A activity is back on the agenda. Bob Papworth investigates the implications of this bullish resurgence
When British Airways' boss Willie Walsh announced back in September that he had drawn up a list of potential merger and acquisition targets for his new International Airlines Group (IAG), more than a few eyebrows were raised.
Airlines in general have not had a good year - indeed, they haven't had a particularly good decade - and ash-clouds and cabin crew strikes have ensured that B has had a rougher time than most.
Even taking into account the extra muscle provided by Iberia of Spain, the other half of the IAG, many observers wondered whether the expansionist mood wasn't just a tad ill-timed.
Neither the British nor the Spanish economies are particularly strong, and 'double-dip' fears persist. Trades unions in both countries have warned of industrial action as a protest against government austerity measures. Throw in some harsh winter weather, another 'flu bug, and a couple of security scares, and a shopping spree begins to look distinctly unwise.
How wrong can one be? According to the Daily Finance website, conditions are near-perfect for a surge in merger and acquisition (M&A) activity.
Companies with a global reach can ramp up their activities in buoyant economies and wind down in those countries that are faring less well, so they're still raking in the cash. And with interest rates so low, there is little point in stashing the money in the bank, so they might as well go out and spend it.
Back in August, the BBC reported that "an M&A frenzy" in the first half of the year had overrun into the traditionally-quiet mid-summer, with the City of London seeing a record number of transactions in July and August.
A month later, Investment Week reported survey results that suggested further increases in M&A by mid-2011. An earlier study by Ernst & Young revealed that 57 per cent of companies are "likely" or "highly likely" to acquire other businesses during the current financial year.
Pip Mccrostie, Ernst & Young's global vice-chair, transaction advisory services, was quoted as saying: "With greater liquidity, we are seeing companies more willing to make acquisitions they have previously deferred. The study shows that we now have more potential buyers than willing sellers, which could lead to an increase in hostile approaches."
While this is all potentially good news for shareholders, it is a less happy portent for employees, some of whom will almost inevitably lose their jobs. For corporate travel managers, there is every chance they will be lumbered with a truckload of extra work, and then lose their jobs.
Combining the travel programmes of two different organisations is fraught with difficulty and once the task is completed - well, who needs two global travel managers?
Robert Daykin doesn't do 'fraught'. He and his partner Richard Plummer - between them they make up The corporate Travel Partners consultancy - have both been through some huge mergers, both as consultants and, in their previous lives, as travel managers.
"It can be a can of worms, or you can handle it in a professional and proper way," says Daykin, in a tone that suggests that the old can/worm interface just doesn't happen on his watch.
"When the merger or acquisition process starts, there may well be restrictions on people talking to one another. However, if they all get their thinking caps on, they should be some way to getting their act together, so they are ready to go once the merger has taken place. And I would suggest they have no more than 100 days to do that, because what's in place after three months is what's going to be there for a long time into the future."
Simone Buckley, director and co-founder of travel management troubleshooter Bouda, tends to agree - up to a point. "There are all sorts of complications that have to be resolved from the outset," she says, "even before you get to merging travel programmes.
"Any merger or acquisition is going to involve the human resources team, because contracts of employment are going to vary - for example, one side may have more generous maternity leave provisions than the other, and that sort of thing needs to be resolved very early on.
"And while not many people have their travel policy written into their contracts, there are plenty - for example in the financial services sector - who do. If one side's employees have a contractual right to fly business class, or to limousine transfers, and the other's don't, that is going to have an inevitable impact on the final shape of the combined policy.
"Similarly, you have to consider how the accounts departments are going to be merged. They will probably have different approaches as to how and when they pay suppliers, and how and when they pay travellers' expenses. They'll have different processes, different practices, different cultures - and again, that's going to inform any new travel programme."
When it comes to finalising a combined travel policy, Buckley is as adamant as Daykin that the merger partners have to "get their act together" from the start.
"If you cannot decide things like class of travel, how you're going to book or how you're going to pay - all the basics - it's just never going to work. It's no good going after short-term deals because you haven't yet really made your mind up - you need to have a clear idea about what you are doing and where you are going, right from the start.
"The key thing is to sort out what's going on, on both sides, at the moment. Decide what you want the merged programme to look like, evaluate the advantages of both partners' programmes, and then cherry-pick the best from both.
"Clearly," she adds, "there may be some areas where neither side is doing a particularly good job, so this is the time to put that right and introduce new and better systems and processes."
Robert Daykin is obviously singing from the same hymn-sheet. "The ideal scenario is that the two travel category teams are able to come together and ask some basic questions - what processes do we use, what's our supply chain terms of booking processes, what's our supply chain in terms of airline deals and so on.
"Everything becomes a case of what is best practice, or at least better practice. Find out who has the best deals in place, and then go back to each of the suppliers concerned and negotiate a new deal. The better of the two deals must represent the absolute maximum price to pay going forward, but clearly if two large requirements come together, they now have more leverage than there was before - if, indeed, there was any leverage before.
"It's a wonderful opportunity for the business to adopt best practice - there is a real opportunity to bring best practice into play." Daykin does, however, add a word of warning. "At the end of the day, there has to be one policy, one booking process, one payment process, one expense process - one of everything.
"But that doesn't mean starting from scratch, because there's a real danger that you'll be throwing the baby out with the bath-water. Don't dismiss a programme - there may be something really good in there."
Effective communication, he believes, is paramount. "The worst thing that can happen is that people get emotional about the way things were, what they were used to. They'll want to hang on to that, even if it wasn't particularly good. They need to be persuaded."
Tom Stone, managing director of travel management consultancy Sirius, concurs. "The one thing one must not do is make assumptions; the one thing you absolutely have to do is communicate.
"This is somewhere where I really think a consultant really does add value - and I'm not just saying that because I am a consultant. If you use someone who is seen as neutral, who can explain the implications, who will take time out to go and talk not just to the travellers, but to all the stakeholders, you have a real advantage.
"Company culture plays a big part in all this. There are occasions where you can make concessions [on policy], so long as the issues are not mission-critical, and then people will feel their views are being taken on board. There's always room from a bit of 'give' on both sides. "If you simply dictate to people, bookers and travellers will look to find fault. It's really about common sense and empathy - put yourself in the position of the company that's being acquired, and think how you'd feel."
Note that Stone uses the term "acquired" - so what about mergers?
"More often than not, the word 'merger' is actually a misnomer because nine times out of ten it's a takeover - the bigger side will usually have a better, more sophisticated arrangement with its incumbent travel agent, and better deals with airlines and hotels, whereas the smaller company's travel programme will, to a large extent, be subsumed into that.
"That said, there is no one typical pattern. When I think back over the four or five big mergers that I have lived through and worked through, they have all been different.
"It's not always as crystal clear as one side allowing business class and the other insisting on economy. It gets more complicated when, for example, one company allows business class for director-level travellers while the other says is business class for vice-presidents and above. That sort of thing can be a real sticking point, and those kinds of problems are almost always internal. The devil is in the detail."
Is this an opportunity, as Bouda's Buckley hints, for a spot of spring-cleaning, time to re-think the entire travel programme?
"It may be, in some situations, where two very similar companies can compare the deals they have with a particular airline, for example, but that's not often the case. If you have a large American corporation taking over a smaller European company, the latter can pretty much expect to lose its local suppliers and to be forced into a bigger, global set-up."
One might expect HRG (Hogg Robinson Group) client management director Stewart Harvey to have a different, travel management company-focused slant compared to the consultants' view. After all, HRG has had to deal with some pretty big M&A scenarios in recent times - notably in the banking and pharmaceutical sectors.
Apparently not. "You have to start with honest-to-goodness raw data," he says. "Work out what the two companies have been doing, find the common ground, and then work out your methodology - how are you going to make it [the merged travel programme] work?"
Harvey is equally clear on the communications issue. "There is a lot of talk about 'change management', but when it comes down to it, an effective travel programme has to take account of the corporate culture and, in my experience, mandation is limited in its effectiveness. "You can achieve just as much, if not more, with a system of pre-trip reporting - most companies that have merged move towards some sort of pre-travel approval process.
"People view a mandate as something to be worked around. When you encourage people to think more, to take responsibility because they want to, they come at it from the opposite direction.
"Mandation is sometimes just a means to mediocrity."
The last word, however, goes to corporate Travel Partners' Robert Daykin, who believes that merging travel programmes may be complex, but complications can be overcome by following a very simple mantra.
"Plan the work," he advises, "and then work the plan."