1. Deal Analysis – Priceline’s
Acquisition of Kayak
USC EMBA San Diego – 2013
Your Logo
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. The Deal
What was announced?
In the later part 2012, Connecticut based online travel agency
Priceline (NASDAQ:PCLN) announced its largest acquisition since it
went online in 1998. The target is the fast growing Kayak (NASDAQ:
KYAK), an online travel search firm that enables consumers to search
for multiple travel offers from one web or mobile platform. The deal
calls 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. What is the Story?
It is about Capturing the Consumer!
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 world
Bottom Line – This
is a Big Industry
A growing middle-
class in developing
countries
$460B = 23% of travel is for leisure
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. Online Travel Industry
The Conversion Funnel
How can Priceline
prevent more drops
and increase
Goal – Improve conversions?
Conversion
Rates!
8. The Deal
Remember the Value Chain?
So who are the players in the value
Dream Research Plan Booking Fulfill Sharing
chain?
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. 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. Advanced Better user Advertising
Technology
experience Revenues
Offer a product buyers want at Customer Loyalty
prices they demand
Strong Brand
Customer experiences
Cost Advantages
High Conversion Rates
Positive Economies of Scale Highly Profitable
Feedback
Loops International
Strength
Negotiating Power with
suppliers
Strong global growth
in online travel
Valuable Deep Pockets For
Acquisitions Investment
Aggregation of Demand Data