London: 21 February 2014

Risk Capital looks to invest in more travel businesses as ‘time is right’

The private equity firm that bought into both Neilson and last year is on the hunt for further investment opportunities in travel.

Risk Capital Partners, which was jointly founded by entrepreneur Luke Johnson, is probably best known for its deals in the restaurant sector, but partner Michael Simmonds is looking to add more travel businesses to its portfolio.

“We’re always on the look-out for new investment opportunities and we are very keen to invest in more travel businesses. We think it’s a good time and we’d be keen,” Simmonds told TTG in an exclusive interview.

Typically Risk Capital looks for “leaders in their niche” or “disruptive growth businesses”, but Simmonds said the business was happy to deal with “difficult situations”.

“We don’t mind messy. We recognise you’ve got to take some risk at the point of investing,” he said.

Risk Capital’s desire for more deals in the sector comes as industry experts predict a bumper period for mergers and acquisitions.

Earlier this year, Catalyst Corporate Finance’s Mark Farlow suggested that the industry would likely see an increase in M&A activity in 2014, with private equity firms seen as one of the biggest drivers.

Simmonds believes that even though travel may have endured a difficult few years it is now on the path to recovery.

“Travel had a really torrid time over the last five years and we saw that reduction in holidays generally slowing and then bottom out, and then just start to grow again. So we took a view that actually now is a time to look at travel. There are signs everywhere of consumer confidence returning,” he said.

“After five years of belt-tightening we can see that in a sustained low-interest-rate environment people are starting to spend a little.”

Simmonds characterised the Neilson deal as a buy-in and management buyout, with the company being bought from Thomas Cook.

He said: “We always like buying from larger corporates or even just bigger companies, because if you reset the incentives for the mangers that run it there’s a rejuvenation.

“It’s human nature in a way. One of the main foundations of private equity returns is the impact of a motivated management team with free reign.”