Deal Analysis – Priceline’sAcquisition of KayakUSC EMBA San Diego – 2013                              Your Logo
Who are these guys?   •   Founded in 1997             • Founded in 2004   •   Online Travel Agent (OTA)   • Metasearch eng...
The DealWhat was announced?In the later part 2012, Connecticut based online travel agencyPriceline (NASDAQ:PCLN) announced...
What is the Story?It is about Capturing the Consumer!
Online Travel Industry$2 Trillion Industry: 9% of the Worldwide GDP                                                       ...
Online Travel Industry        Lets talk about the Value Chain                           •   Vacation Packages             ...
Online Travel IndustryThe Conversion Funnel                          How can Priceline                         prevent mor...
The DealRemember the Value Chain?            So who are the players in the value    Dream    Research  Plan     Booking  F...
Dream              Research   Plan        Booking    Fulfill      Sharing• Direct Suppliers are winning online booking sha...
Strategy What is Priceline getting for $1.8B?• Elimination of a potential  competitor• Expanding the role in the Value  Ch...
Advanced                 Better user           Advertising                                       Technology               ...
FinancialsProfit Centers of the two Companies
FinancialsKayak operating costs: Every $1 in revenue costs $.75                                 Estimated 2012            ...
FinancialsOur Approach to the ValuationPriceline                                     2012         2013     2014      2015 ...
FinancialsHigh level summary of our valuation
THANK YOU!
Upcoming SlideShare
Loading in...5
×

Kayak priceline deal_post

826

Published on

0 Comments
1 Like
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
826
On Slideshare
0
From Embeds
0
Number of Embeds
3
Actions
Shares
0
Downloads
48
Comments
0
Likes
1
Embeds 0
No embeds

No notes for slide

Kayak priceline deal_post

  1. 1. Deal Analysis – Priceline’sAcquisition of KayakUSC EMBA San Diego – 2013 Your Logo
  2. 2. Who are these guys? • Founded in 1997 • Founded in 2004 • Online Travel Agent (OTA) • Metasearch engine • “Name Your Own Price” • 133 employees • William Shatner • $224.5M (2011 revenue) • 5,000 employees • 55% from advertising • $4,355.6M (2011 revenue) • 45% from supplier & • Commissions OTA referral fees • Managed inventory • 53% of US metasearch queries
  3. 3. The DealWhat was announced?In the later part 2012, Connecticut based online travel agencyPriceline (NASDAQ:PCLN) announced its largest acquisition since itwent online in 1998. The target is the fast growing Kayak (NASDAQ:KYAK), an online travel search firm that enables consumers to searchfor multiple travel offers from one web or mobile platform. The dealcalls for:• $500 million in cash• $1.3 billion in stock• Adding up to a $1.8 billion dollar valuation of Kayak The deal’s price tag is at least 8 times greater than any of Priceline’s previous acquisitions and is slated to close in mid 2013
  4. 4. What is the Story?It is about Capturing the Consumer!
  5. 5. Online Travel Industry$2 Trillion Industry: 9% of the Worldwide GDP 10% per year growth 77% of travel is for 2nd largest stand-alone business industry in the worldBottom Line – This is a Big Industry A growing middle- class in developing countries $460B = 23% of travel is for leisure
  6. 6. Online Travel Industry Lets talk about the Value Chain • Vacation Packages • Sight seeing • Vacation Home • Local Attractions• Shared values • Friends Rent. • Local Bus tours• Motivation factors • Facebook, • Travel Packages • • Restaurants• Quality of life Airlines • Travel Blogs • Resorts Packages • • Shopping• Personal success Hotel, Car • Photos • Friends • Cruises • Travel reviews• Friends, Movies,• TV, Internet, Ads • Buses, Trains • Emails Dream Research Plan Booking Fulfill Sharing • Restaurants $$ • Advertising $$$ • Sales pitch • Attractions • Google Ad-words $$ • Ticket $$$ during stay • Social Media Ads $$ • Package Deals $$$ • Targeted Ads
  7. 7. Online Travel IndustryThe Conversion Funnel How can Priceline prevent more drops and increaseGoal – Improve conversions? Conversion Rates!
  8. 8. The DealRemember the Value Chain? So who are the players in the value Dream Research Plan Booking Fulfill Sharing chain?
  9. 9. Dream Research Plan Booking Fulfill Sharing• Direct Suppliers are winning online booking share from the OTAs• Metasearch enabled the direct suppliers toSuppliers Direct better reach the consumer and bypass the OTAs Capture the customer Capture more of the• Priceline early Value Chain purchasing Kayak, keeps the direct suppliers encroachment in check Travel Information Websites Mobile Platforms
  10. 10. Strategy What is Priceline getting for $1.8B?• Elimination of a potential competitor• Expanding the role in the Value Chain• Increasing “Look to Book” for Priceline• Potential cost reduction• Strong Platform for Growth• More leverage over direct suppliers
  11. 11. Advanced Better user Advertising Technology experience RevenuesOffer a product buyers want at Customer Loyalty prices they demand Strong Brand Customer experiences Cost Advantages High Conversion Rates Positive Economies of Scale Highly ProfitableFeedback Loops International Strength Negotiating Power with suppliers Strong global growth in online travel Valuable Deep Pockets For Acquisitions Investment Aggregation of Demand Data
  12. 12. FinancialsProfit Centers of the two Companies
  13. 13. FinancialsKayak operating costs: Every $1 in revenue costs $.75 Estimated 2012 Revenue = $314M
  14. 14. FinancialsOur Approach to the ValuationPriceline 2012 2013 2014 2015 2016 2017 2018 2019 7 Year GrowthHotel Bookings:Market Share of Pre 3.58% 3.98% 4.18% 4.38% 4.38% 4.40% 4.42% 4.44% 24.02%Occupied Hotel Rooms Post 3.58% 4.08% 4.38% 4.61% 4.66% 4.71% 4.76% 4.80% 34.08%Priceline 2012 2013 2014 2015 2016 2017 2018 2019 7 Year GrowthHotel Bookings: EBITDA Margins Pre 23.2% 22.7% 22.2% 21.7% 21.2% 20.7% 20.2% 19.7% -15.09% Post 23.2% 23% 23% 23% 23% 23% 22% 22% -5.17%Kayak 2012 2013 2014 2015 2016 2017 2018 2019 7 Year GrowthAdvertising:Online Ad Revenue Pre $ 180 $ 195 $ 208 $ 221 $ 232 $ 243 $ 256 $ 268 48.89%per 1,000 Post $ 180 $ 210 $ 234 $ 255 $ 272 $ 289 $ 304 $ 320 77.78%Kayak 2012 2013 2014 2015 2016 2017 2018 2019 7 Year GrowthHotel Referral Fees:Per 1,000 Pre $ 321 $ 385 $ 424 $ 458 $ 490 $ 519 $ 550 $ 583 81.62%Hotel Queries Post $ 321 $ 447 $ 532 $ 601 $ 660 $ 709 $ 755 $ 799 148.91% Priceline Kayak Stock Price Pre $ 584 Stock Price Pre $ 31.0 Current $ 688 Current $ 39.9 Our Value $ 675 Our Value $ 34.8 Maket Cap Pre 29.1 B Maket Cap Pre 1.2 B Current 34.3 B Current 1.5 B Our Value 33.7 B Our Value 1.2 B
  15. 15. FinancialsHigh level summary of our valuation
  16. 16. THANK YOU!
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×