Dufry’s Travel Experience Revolution takes off
In early July 2022, Dufry, the global travel retail player, announced a business combination with Autogrill, a global travel food & beverage (F&B) operator. The ambition of the business combination is to have a lasting impact on the travel retail & F&B industry by refining the experience for travellers, and create revenue and cost synergies for the newly combined Group. For a successful combination, announcing the leadership representatives of both companies as well as creating a “One Team/One Company” spirit were key first steps of the integration process.
By Maurus Lienhard and Philipp Haumüller
Business combinations and post-merger integration (PMI) – theory says [1]
Firms such as AB Inbev, Cisco, Johnson & Johnson and L’Oréal provide evidence that business combinations/merger & acquisitions (M&A) can be an important component of the growth strategy of successful firms. M&A is a familiar tool for re-shaping businesses by adding, redeploying, recombining and/or divesting assets and resources with the goal of strengthening the resource base.
Both academics and practitioners outline the crucial role played by post-merger integration (PMI) in the success of business combinations/M&A, with the PMI process typically coming up against obstacles related to capturing synergy, operational disruption, structural integration, employee retention, loss of identity and/or independence, customer retention and learning challenges amongst others.
Overall, business combinations offer tremendous opportunities to create and sustain value, especially for companies that manage to get three mutually reinforcing topics right: pursue transformational as well as combinational sources of value; target a new level of synergies; and understand and address the legacy companies’ points of cultural incompatibility.
Travel industry changes set the scene for a business combination
The global travel industry is coming out strongly from the most severe crisis it has ever experienced, and while in some parts of the world the recovery process is still underway, travellers confirm their propensity to travel as well as – at least for the time being – to spend more than before the pandemic. Another important driver are the favourable market dynamics as global passenger traffic is expected to increase significantly over the next decades, having the effect of continuously expanding the customer base. [2]
On top of this, comprehensive market analysis covering all major stakeholders, such as employees, concession partners and brand suppliers, as well as including insights from industry experts identified important changes in travellers’ expectations and shopping behaviour. Customers care for more individualized offers and tailored services, which cater for their personal needs and preferences at any specific moment of their journey. This includes new hybrid formats, which combine retail and F&B assortments into a holistic travel experience.
Combining the businesses
To benefit from all these market dynamics and changes, Dufry and Autogrill announced a business combination to create a new, integrated global Travel Experience player. The newly combined Group features a complementary strategic fit, supporting the company’s new long-term strategy and redefines the boundaries of the industry by focussing on enriching the traveller journey based on experiences, digitalization and innovation. The combined entity will address about 2.3 billion passengers in more than 75 countries through approx. 5,500 outlets across around 1,200 airports and other locations, employing over 60,000 people and generating revenues of around CHF 13.6 billion (2019 pro-forma).
Shortly after the announcement of the combination with Autogrill, Dufry presented its new strategy called Destination 2027. With its first strategic pillar clearly focussing on customer-centricity and providing travellers with a redefined, holistic travel experience that reflects evolving consumer trends, the combined Group features an enlarged portfolio, which features additional and innovative formats, including digitalization. Next to the traveller centricity, the other three key pillars of the strategy are geographical diversification, operational improvement culture and ESG – all powered by the Groups’ employees.
Step one – explain, listen and answer questions
Although the business combination was announced in July 2022, the integration process could only be launched in the following February, when the transaction was officially closed upon receiving approvals from antitrust authorities. Immediately after the closing, the senior leadership embarked on a roadshow visiting the main headquarters and regional offices of the two entities in Europe and the US. While such a business combination presents many opportunities, there may also be uncertainties, for instance for employees, and momentum in the right direction needed to be secured. The roadshows played a crucial role to launch the ONE-TEAM mind-set and the leadership team has in person explained the rationale of the combination to the employees. The town halls have also featured Q&A sessions allowing for an interactive engagement with employees.
Combined expertise represented in the Integration Management Office (IMO)
The integration process is driven by a dedicated IMO with the aim to ensure a seamless transition, leveraging each other’s strength and to ultimately build a joint organization. Accordingly, leaders from both companies are represented in the IMO to ensure that both travel retail and F&B expertise are considered and leveraged, at the same time addressing the cultural aspects of this transformational journey. Key overarching work-streams are structured globally i.e. definition of operating model & organizational design, culture and change management, communication and technology, while functional work-streams are covered globally and/or regionally. The initial weeks and months had a simple focus:
Discovery: Understand how work was performed in each of the two entities
Planning: Develop preliminary action plans for key projects and ways of working going forward
Coordination & Prioritization: Coordinate across functional silos and identify interdependencies
Launch and harvest quick wins: Start executing, mitigating risks and accelerating value creation (synergies) where possible
While each work-stream drives its own initiatives, weekly integration calls ensure alignment on priorities, identification of interdependencies and tracking of progress & timelines. Additionally, physical meetings support teams in having focused and dedicated time together, allow for a mutual understanding of the cultures and foster the creation of a ONE TEAM spirit.
Furthermore, the IMO put efforts in a dedicated communication plan to keep all employees regularly informed on the project status. Additionally, a culture survey was conducted to give insights on the current values and identify expectations for the combined Group.
Operating Model and Organizational Design
The work performed by the work-streams provided key inputs in understanding and defining the future ways of working, developing the corresponding global organization for the team leading each work-stream. The appointed leaders on level “CEO-2” were then in charge to further fine-tune their teams based on global guidelines. The new organizational structure follows the principles and requirements to execute the Group’s strategy Destination 2027.
New branding ahead
To highlight the transformation and to reposition the combined entity for growth, the leadership team is also defining a new brand and visual identity – a key milestone for all employees to share a common «home» and to reinforce the ONE COMPANY approach. The new brand name and identity – expected to be launched in the second half of 2023 – will reflect the new enlarged offering, provide a clear reference to a holistic travel experience for customers and online communities, and substantiate the ONE TEAM mind-set for all employees, independently from their previous legacy companies.
Challenges and opportunities of the Integration
Whilst Dufry has considerable experience in post transaction integration, there are certain key challenges. One aspect for instance, is the fact, that from the transaction’s announcement until the closing, several months elapse – in this case seven – during which for legal reasons no actual implementation steps, formal plans and initiatives can be communicated or executed. This is always a difficult period, even more so for employees who need to cope with a certain level of uncertainty with respect to the implications of the business combination on their jobs.
Understanding and examining existing processes, operating models, and finding a common way of working posed particular challenges in this integration process. Typically, travel retail and F&B offerings require distinct capabilities, knowhow and processes even when handled in the same location (i.e. an airport). This needs to be reflected in the organizational setup and local workflows going forward. Finally, the key challenge is to protect daily operations from disruption by the additional workload generated by the overall integration work.
The combined entity is an incredible opportunity for all stakeholders, bringing a unique new scope by including travel retail and F&B, and generating benefits for travellers, brand partners, concession partners, employees and shareholders. By bringing together the two complementary entities, the aim is to extract more than the sum of the two and revolutionize the industry.
[1] Bodner, Julia, Captron, Laurence (2018) Post-merger Integration. Journal of Organization Design; McKinsey (2010), Perspective on merger integration
[2] ACI World – an airport association – is forecasting the world’s airports will handle 19.3 billion passengers in 2041, nearly triple 2022’s total.
Maurus Lienhard
co-Leads the Integration Management Office for the business combination of Dufry and Autogrill. He holds the position Chief Strategy & Transformation Officer of the combined Group since the beginning of 2023 with responsibilities in Strategy & Transformation, M&A, Corporate Communication and Innovation / Corporate Venture Capital. Maurus holds a Master in Accounting and Finance from the University of St. Gallen.
Philipp Haumüller
co-leads the Integration Management Office for the business combination of Dufry and Autogrill. He leads the Treasury department of the combined group since May 2023 and has previously been Dufry’s M&A and Corporate Development Head for nearly 10 years. Philipp holds a PhD from the University of Basel (Economics), is a Chartered Accountant (Switzerland) and a CFA Chartholder.