How Certares is making capital out of Covid

‘The only shop in town’ has travel companies queuing at the door

IF you’re a travel company seeking pandemic survival funds, there’s probably only one person you are going to call: Greg O’Hara, founder and senior managing director of New York-based investor managers, Certares.

But don’t expect O’Hara to pick up the phone right
away. He’ll be busy answering the two or three calls a day from travel
companies seeking quick capital, either to support their businesses during the
Covid-driven downturn, or make opportunistic acquisitions, or pay down debt to
ward off creditors.

In fact, O’Hara has been so busy in the past 18 months
that he no longer needs to make outbound calls to scope potential companies
to invest in or acquire. Those companies are now queuing up for capital.

“We’re the only specialist in the travel space. The
only shop in town. So, when someone decides that they want to take advantage of
the market disconnection, it’s us they call.”

Certares has a platform for private equity, an
opportunity fund for distressed companies, a real estate platform and a venture
capital platform.

Speaking at WIT Experience in Singapore via video link
from Nice in France, O’Hara said there had never been a better time to invest
in travel businesses… “if you’re an expert”.

With branch offices in Luxembourg and Dubai, Certares has
investments in diverse travel operators, such as Ama Waterways, American
Express Global Business Travel, G Adventures, Hertz, Latin American airline
Latam and Brazil’s Azul.

“I think the first investment we made was US$300-plus
million in TripAdvisor, days after President Trump shut the border. And I must
tell you that not all my investors thought I was clever at that point in time.

“But I’ve been through enough of these downturns and upturns
in my career, that it was easy to recognise what the opportunity might be.”

Certares has raised more capital during 2020 and 2021,
than it had managed in the previous eight years. “We had a larger opportunity
set to pick from, and we could pick the best opportunities,” O’Hara said.

The highest profile investment made by Certares was
leading Hertz through bankruptcy recovery.

“All of our investments were in good companies with
management that was relatively solid.  They
had a good outlook based on travel recovery. What they needed was enough
financial backing to be able to survive, whatever the downturn held, and that’s
what we provided.”

O’Hara revealed that some of the “paper” money
Certares has made “has been quick”, while most investments have returned higher
capital return than the growth rate of GDP, or the general market.

“As long as these companies keep growing, we’re gonna
keep holding them. Our philosophy is, if the company’s not up to something,
growth or acquisitions or transformation, then we’ll sell it, but so far, since
we started doing this in 2012, we haven’t sold anything.”

O’Hara is bullish about investment prospects in Asia, singling
out Singapore and its sovereign wealth fund (GIC) for special praise.

“They’ve [GIC] been big supporters of ours for a few years now,
and have been very thoughtful about helping us, not only in Singapore, but in
the surrounding Asia area.”

He also likes prospects for investment in Malaysia, Thailand and
Indonesia. Japan, he says “has been traditionally hard to buy in”.

“We’ll look at investments in Asia, and probably make
investments in larger companies rather than smaller companies where the
management teams tend to be more mature.”

Some more thoughts from Greg O’Hara:

On investments in startups

“We want to be supportive of those businesses and the start-up ecosystem in Asia, where some of the most innovative ideas are coming from.”

On investments in fintech

“That’s an interesting business to us because most of our
employees have a finance background. Being in the Fintech spot is a good one, but
they tend to be fairly expensive companies to buy.”

On subscription models

“It’s just a different way to monetise users and we think it’s
pretty good. Stay tuned for more developments.”

On SPAC, or special purpose acquisition companies 

“The market got overheated. There were too many of
them. Most of the stock market runs on a supply versus demand curve. The supply
was too high. The demand was too low.

“I think that market will normalise over time. The good companies who deserve to be public by going through SPAC will do well, the companies that shouldn’t have been public, they will struggle and possibly get taken private.”

• Watch full interview here.