Wednesday, July 17, 2013

How Does Homeaway Do Acquisitions ?

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Vacation Rental Owners might find the following extract from a recent article on Homeaway interesting, as it gives some insight into the strategy and tactics that Homeaway uses to identify potential acquisition targets and then to close these acquisitions. it has clearly been a successful approach, as they continue to be the market leader .....



Co-founder and CEO Brian Sharples, a former Bain & Co. consultant, knew that one way to outdo rivals was to swallow up smaller competitors to gain market share. In fact, HomeAway has acquired nine leading vacation rental websites including Vacationrentals.com, Owners Direct and VRBO.com, an acronym for Vacation Rentals by Owner.


HomeAway doesn't just evaluate a rival's books. Analysts say it seeks to form a relationship with top executives to ensure that they're a good fit with the company.


The upshot of all this merger activity has been positive for HomeAway. In the first quarter ended March 31, 2013, revenue surged 24% to $79.5 million from $64.1 million in the first quarter of 2012.

HomeAway generated 84% of that revenue from 742,000 listings in which subscribers pay $349 to $999 annually to publicize their home availability on its website. Sixty-two percent of its global revenue comes from the U.S., 36% from Europe, and 2% from South America and Australia.

When Sharples and co-founder Carl Shepherd, currently chief strategy officer, first launched HomeAway in 2005, Shepherd taught him to "get to know the other company before acquiring them," he said. They'd spend six months to two years investigating the rival's culture and getting to know the CEO to ensure that it was a good match. "We took a partnership approach," he said.


In addition to cultural fit, Sharples targets ascending companies. He's looking for 30% growth. "We don't like to buy companies that haven't demonstrated they can make money," he said.


When he researched what it would take to grow, Sharples realized that "we would need to buy a number of companies in different geographies to be successful."


Expanding its footprint into global locations creates a "network effect," Sharples said. "The more travelers you have, you have more choice," he said. As HomeAway attracts more travelers, it spurred more homeowners to list on the site.


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