The Priceline Group, which has Kayak and OpenTable, is acquiring Momondo Group, a U.K. based travel search company. The all-cash deal for Momondo is worth $550 million, and is one of Priceline’s pricier acquisitions. However, it is still less than the $2.6B paid for OpenTable and $1.8B paid for Kayak.
Momondo Group runs CheapFlights and Momondo, a European search engine for hotels, flights, and cars. This is similar to what Kayak is for the United States. Furthermore, this would make for a powerhouse in search travel, expanding Priceline’s reach and customer depth.
Momondo Acquisition Synergies
This acquisition seems to make plenty of sense for Priceline. Consequently, Priceline will expand its travel search capacities and grow its book of business.
This deal adds the European Momondo travel database to Priceline’s existing Kayak portfolio. Additionally, it will improve the combined value through cross-selling and having more properties and critical mass, pushing it higher in a consumer’s mindset. Additionally, this will expand the range of customer and regions of properties that Kayak and Priceline offers. Now when customers search for European travel on Kayak, they can get more personalized recommendations, reviews, and information on potential getaways and areas of interest. By improving the reach of Kayak’s offerings, Momondo will increase the value of Priceline’s travel search business.
Similar to the acquisition of Travel Keys by Accor, cost reductions are typically a larger share of M&A synergies. Likewise, this could include headcount and operations reductions, streamlined / merged corporate activities, best practice sharing, and others. Additionally, more company-specific cost synergies could include stronger negotiation power with retailers or businesses. For example, by combining Kayak and Momondo search, they would have higher bargaining power and leverage with airlines and hotel companies. Thus, they would be able to command better (lower) rates, or higher commissions due to the increase in business. This higher payoff would exceed the current payouts of the two companies combined. This would also translate to vacation packages and car rental services, by concentrating this supplier power (as a supplier of customers/business).
The benefit of brand recognition of Priceline and Momondo would augment the value the customers and shareholders. Additionally, Priceline can saturate more areas with more offerings, whether that is for flights, hotels, or cars. Thus, this critical mass improves the value of every search already within Kayak.
Risks, Mitigations, and Considerations
Some of the operational risks would be the integration taking longer than expected, resulting in delays and inefficiencies. Or, those who value the Momondo brand may not be able to translate that value to Kayak, resulting in a potential loss in business.
Priceline can help mitigate these risks by performing stringent due diligence. They should also make sure that the acquisition and integration of Momondo’s brands is both smooth and communicated well to current and potential customers.
This acquisition makes tremendous sense for Priceline, looking to expand its already robust travel search franchise in Kayak. Back in the day (before points) I would use Kayak and Google Flights as my go-to for price comparison and shopping. This expansion will make those who are international travelers happy. Lastly, I expect more details on Priceline’s game plan and immediate actions shortly.
Featured image from Pixabay of a flight that you can find on Priceline’s Kayak and now Momondo! Original Article here.
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