2025 Travel & Hospitality Tech M&A Outlook

M&A Activity Tailwinds for 2025

The general M&A outlook for 2025 is cautiously optimistic with the EY-Parthenon Deal Barometer expecting a conservative 5% to a rosy 11% rise in deal volume, while the US Deals 2025 outlook from Price Waterhouse Coopers (PwC) expects an increase in momentum in spite of potential volatility and complexity due to regulatory shifts by the incoming US administration.

It appears that 2025 could present a soft landing for travel & hospitality tech companies from the uneven momentum of 2024 due to regulatory scrutiny, high interest rates, and political uncertainty. The Fed is expected to continue cutting interest rates, the S&P is at historically high levels, and many private equity firms have dry powder to be deployed.

Interest Rates

Lower interest rates increase the appetite for people to come into the market, but the recent period of high interest rates has created an environment for balanced, thoughtful growth as opposed to pre-2022 when profitability wasn’t as important. Lower interest rates are better for M&A because buyers can more easily use debt to finance acquisitions.

Stock Market

The S&P trading at such high levels has increasingly improved the M&A market for strategic buyers. In the last two to three years, public companies have struggled to acquire assets because their cost of capital was very high, their stock prices were low, and there existed general uncertainty on how to deploy capital. Public companies may have more flexibility to opt for using higher-trading stock to participate in transactions, which could push valuations higher, and private equity firms could raise new funds if they sell off portfolio companies and return cash to their limited partners.

Dry Powder

The amount of money private equity firms have raised but have not deployed is at an all-time high, so there’s a strong incentive to invest this $2 trillion of dry powder in productive and ROI-positive investments. There's a lot of demand for technology companies if the assets are performing. PwC found approximately 4,000 to 6,500 private equity exits were delayed for the past two years due to inflation and rising interest rates, and these companies are not in the business of sitting on money. EY-Parthenon Deal Barometer’s baseline scenario is that there will be a 16% rise in PE deal volumes in 2025.

New Administration

The administration has made very little impact on economic outcomes and the investment world in the last century. Anxiety usually comes from the uncertainty of an election year and then stabilizes after the results. While Republican administrations historically believe in lighter regulatory approaches overall, the new administration is making non-traditional appointments, so it’s yet to be seen if some industries might benefit from deregulation, like legacy oil and gas, while others, such as Big Tech, may face continued merger challenges by the DOJ and FTC, such as those of Meta’s purchase of Within and Microsoft’s purchase of Activision.

However, outside of the major players, the overall promise of the technology sector continues to attract attention due to increasing AI adoption, continuing transitions to the cloud, and IoT growth. The number of completed M&A deals in tech, media, and telecom has stayed relatively constant across the last two administrations.

Travel & Hospitality Market Indicators

The travel sector has proven to be extremely resilient, bouncing back from the screeching halt of the pandemic and continually capitalizing on trend after trend, whether more experiential travel, detour destinations (less crowded day trips from a popular destination), solo travel, sustainable travel, or the new silent travel (where you can truly disconnect).

As property owners leverage their local expertise and assets that are aligned with current trends, we’ve seen property management software companies offering streamlined operations and digital transformation raise capital to bolster their service offerings or expand their geographic reach.

AI has become a huge driver, not just for hotels and properties seeking personalization and diversification in customer touchpoints, but for a lot of M&A in the space. We at Vista Point Advisors have seen successful outcomes with businesses that apply AI effectively, particularly those that have built robust workflows, infrastructure, and data, and then layer an AI model to turbocharge the organization. Applied AI businesses are where most of the M&A and capital raising towards liquidity is happening and where longer-term success has been seen. Goldman Sachs’ 2025 M&A Outlook agreed that software companies with entrenched customer relationships and proprietary datasets have kickstarted AI transformation at the application level and have already produced solid M&A outcomes.

What Founders Should Do to Prepare

With a surplus of PE capital and a cautiously optimistic market outlook, you might want to consider raising capital or selling your business in 2025. The most important thing is not necessarily the market outlook, but whether you’re running a solid company with sustainable competitive advantages and business models in the face of rapid technological shifts.

Keep an eye on hitting your key metrics, and if you're in a growth stage, consider selling while you’re winning. Check out our infographic on what other milestones might signal to SaaS founders that they’re well-positioned for a transaction.

This material and the opinions voiced are for general information only and are not intended to provide specific advice or recommendations for any individual or entity. All opinions and views constitute our judgments as of the date of writing and are subject to change at any time without notice. The material may contain "forward-looking" information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns and proposed or expected portfolio composition. Past performance is no guarantee of future results and there is no assurance this trend will continue.

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