From a standing start to a £300 million exit

In 1980, Dinesh Dhamija and his wife started selling travel tickets from an 80-square-foot kiosk in Earl’s Court tube station. In 1999, Dhamija spotted the massive potential of the internet for the international travel business and turned his business into eBookers, one of Europe’s first internet travel companies.

By 2005, eBookers had expanded to 11 European countries, with 2,000 employees and a market of 300 million people, having established itself as a go-to site for people looking to travel from the UK to just about anywhere in the world.

By this time, eBookers had also undergone two successful funding rounds, leaving Dhamija owning 40 per cent of the company’s stock. At this time, he decided that it was time to sell up, quickly gaining the interest of six potential buyers, before completing a sale to Cendant for £300 million, which netted Dhamija around £100 million.

So, what is the value in looking at a deal from 2005 and in a sector that has been decimated by the COVID-19 pandemic? Primarily because Dhamija’s growth and sale of eBookers offers a perfect model of how to go about building a company with an exit always in mind, a frame of mind that is relevant to business owners at any time and in any sector.

Dhamija’s sale of eBookers also offers valuable insights on how to find natural strategic acquirers for your business, tips on how to spot whether an acquirer is serious and advice on how to accelerate the sale of your business, amongst other things.

For any business owners gearing up for a post-COVID sale, then, there’s no better example of how to conduct a successful business sale than this. What’s more, with his wide and impressive array of post-sale projects and roles, Dhamija illustrates how selling your business at the right time can push you on to even bigger things.

A whirlwind of growth

As a member of the Young Presidents Organization (YPO), Dhamija was visiting the United States in the late 90s when another YPO member alerted him to the revenue-generating power of the internet.

Speaking in 2011, Dhamija said: “He told me the internet meant I could now make money as I slept [because people still bought tickets online]. I wasn’t a software geek – or guru, for that matter – but I could see the broader picture. And if I’m making money day and night, that has to be good.”

Back in Europe, he teamed up with a German software firm and linked his company up to American Airlines’ online reservation system, Saber.

Sales were slow at first, with zero bookings in the first three weeks, but that soon picked up and by the time the company went public on the Nasdaq, it was generating annual sales of $23 million and revenue of $2.3 million.

eBookers’ IPO saw it raise $54 million. However, a market crash in the spring of 2000 prompted the company to seek another financing round. Lead by JP Morgan, this round saw eBookers raise $45 million and Dhamija never looked back from there.

The next year, sales went up to $100 million. Three years later: $600 million. This success was helped in part by a deal with Walmart’s UK counterpart Asda, as well as other deals which saw eBookers’ booking engine being used by Yahoo Travel and AOL Travel.

By this point, the business, and the online travel industry on the whole, were growing rapidly. Within five years, eBookers had reached a billion dollars in sales. Prompted by his wife, the company’s managing director, Dhamija decided it was time to sell his 40 per cent stake in the business.

Preparing for the sale

When it came time to sell, Dhamija undertook what he described as a “beauty parade” in order to find the bank to assist on the sale, eventually settling on Credit Suisse to work alongside his personal banker on the deal. The potential sale was then put before the company’s other shareholders, receiving their total approval.

However, Dhamija didn’t just sit back at this point and let the bankers do all the work. From his years of networking at conferences and golf days and with his status as an industry leader in the online travel sector, he already had a good idea of the parties that might be interested.

Dhamija quickly identified “five or six” potential suitors whose MDs he knew personally: “We used to meet them at conferences where we were all speaking on the internet, about travel really. It was Expedia, it was Priceline, which was bookings, it was Cendant. […] Travelocity. Opodo, which was the alliance of Air France, Iberia and Lufthansa, owned by Amadeus, and so on.”

At this point, Dhamija personally contacted the suitors he had in mind, inviting them to sign a confidential memorandum of understanding (which they all did) before establishing a virtual document room with them. This virtual environment proved a crucial part of the sales process.

Gauging interest

Dhamija describes how important the virtual document room was in moving eBookers towards a sale: “we would give each one [potential buyer] different codes and they would go in, and we knew when they were in looking at documents”.

The data room provided Dhamija and his bankers with priceless insight into which suitors were really interested in the business, enabling them to see which suitor was viewing and downloading the most documents. This information allowed them to gauge who was really interested and who just wanted to see eBookers deals with other airlines and negotiate similar ones for themselves.

As Dhamija points out, two companies were opening and downloading the greatest volume of documents: one was booking company Priceline, the other was eventual buyer Cendant.

Dhamija knew who these firms had retained as their lawyers and that they weren’t cheap. The amount of time and, therefore, money that they were spending on researching eBookers showed that their interest in the company was genuine.

Negotiating and accelerating the sale

Ultimately, it proved that Cendant had the most concrete interest and subsequently submitted an opening offer. However, they hadn’t factored into their thinking that the price they paid for a previous acquisition (US company Orbitz) had been publicly disclosed in a press release.

When Cendant’s opening offer came in lower than this, the fact that the price for Orbitz had been made public gave Dhamija and his team leverage in negotiations.

From this point, negotiations proceeded between Dhamija in the UK and Cendant in California. Before agreeing on a price, the two parties signed an exclusivity clause. On the surface, with a price not set, this clause might appear to have weakened Dhamija’s hand in negotiations, essentially tying him into a sale to Cendant with no price guaranteed.

However, the clause was time-bound. In essence, then, this served a mutually beneficial purpose. From Cendant’s perspective, it gave them a free-run (for a limited time) at Cendant, without fear of the deal being hijacked. For the sellers, it enabled them to accelerate the process, while allowing them to negotiate a more favourable price. Cendant would have been well aware that, should they not make a good offer, Dhamija and co. could simply return to market once the clause expired.

Eventually, the sale completed for $471 million (c. £300m at the time), putting a fitting conclusion to Dhamija’s journey in the travel business, from a cubicle in a tube station, to a pioneering company changing the face of travel as the internet spread across the globe, to a smooth, lucrative and successful exit.

What can sellers take from the eBookers deal?

2005 may seem like an age ago in the ever-changing world of M&A, but the eBookers deal and how Dhamija approached it can still offer valuable lessons for people looking to sell their business today.

Firstly, it shows the importance of always preparing for a sale, even when you’re not considering one. Dhamija’s years of networking at industry events and close relationships with managing directors at other firms ensured that he already had a list of potential suitors in mind when it came time to sell.

This meant a quick start to the sale process, offering a valuable lesson to any would-be seller dreading an arduous search for potential buyers.

Dhamija’s disclosure of the virtual document room that he, his bankers and potential buyers used, meanwhile, offers a fascinating insight into how the sellers determined which suitors were genuinely interested.

Once they had gauged which parties were most interested, they could move onto negotiations, knowing that they weren’t wasting their time on fruitless talks with a company that wasn’t really interested in an acquisition.

The deal also offers a useful model of how to conduct negotiations and how to help quicken the pace of a sale.

Firstly, the simple fact that Dhamija and co. were aware of the price Cendant had paid for Orbitz may seem like an obvious bit of due diligence on their part. But, nonetheless, it gave them leverage in negotiations and helped ensure that Cendant couldn’t lowball them on the price.

Secondly, the seller’s use of a time-bound exclusivity clause arguably helped to focus and speed up negotiations, possibly making the buyer less keen to drag their heels over the price, at the risk of the bidding reopening to other suitors.

Finally, Dhamija’s choice to sell just as eBookers hit $1 billion in sales illustrates the benefit of getting out when the going is good. While Dhamija could have stuck around to reap the rewards of the company’s exciting growth, he felt a sale was the right way to go. What’s more, with the massive financial crash of 2008 coming just three years after eBookers’ sale, Dhamija can look back on his £300 million exit with no small sense of satisfaction and, perhaps, relief.

Making the most of life after exit

Perhaps more than anything else, Dhamija’s story shows how a well-timed sale can help you move on to other ventures that you’ve perhaps put off for the sake of your business.

Following his exit from eBookers, Dhamija spent nine and a half years working in the charity sector in the UK and India, helping to form some charities, offering his expertise as a board member and donating to others.

Then, in July 2019, he took office as a Liberal Democrat Member of the European Parliament (MEP), serving the region of London. Serving until the UK’s exit from the European Union on January 31st 2020, Dhamija used his years of experience in the travel sector to smooth trading links between EU members and to push for harmony in the services sector, whilst also serving on the budget committee, drawing on his business background to help shape the EU’s budget.

Following Brexit and the UK’s departure from the European Parliament, Dhamija continues to work with the Liberal Democrats as the party’s current Deputy Treasurer.

Overall, Dhamija’s exit from eBookers is a fascinating, illuminating and valuable model of how to grow a business and go about selling it. The smooth sales process, along with the price Dhamija got for the business, illustrate the importance of comprehensive preparation for a sale, as well as the kind of negotiating tactics that can help you get the right price for your business.

Meanwhile, Dhamija’s many projects and ventures in the fifteen years since he sold eBookers go to show that a well-timed and successful exit can be the springboard to other career or personal goals.

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