Legal issues when buying or selling a tour operator business

Anyone entering or exiting a tour operator business in the UK must contend with a complex set of regulations. Statutory and other rules impact almost every aspect of the travel business. Most tour operators, for example, must hold an ATOL licence from the Civil Aviation Authority (CAA). Buyers should confirm a licence is in place, understand the products and sales channels it covers, and assess whether completion triggers any notification, variation, or re-authorisation requirements. Importantly, ATOL licences do not automatically transfer to a new owner of a tour operator business and a buyer should engage with the CAA early to understand the regulatory steps and timing implications for the proposed transaction structure. Other regulations that must be considered include the Package Travel and Linked Travel Arrangements Regulations 2018 (PTR 2018).

For many tour operators, the key question is whether the business is the “organiser” of packages as this can drive responsibility for performance of the package, assistance obligations, and customer remedies. PTR 2018 also requires organisers to have insolvency protection in place so that travellers can be refunded and, where relevant, repatriated if the organiser becomes insolvent. For the deal to run smoothly, cooperation between buyer and seller is essential. Sellers should expect to receive extensive enquiries on historical compliance, complaint handling, and the potential for any future regulatory sanctions.

The very nature of tour operator businesses means international legal considerations play a large part in any negotiation for the sale or purchase of a business in the sector. Even where the customer base is largely in the UK, the business will still be subject to international travel regulations and consumer protection laws. International data protection law and insurance coverage must also be considered. These international aspects of the business will be integral to the due diligence process and add an additional layer of complexity to M&A deals in the tour operator sector. Potential red flag issues should be identified early on to avoid any significant impact on deal budgets and timings.

The valuation of tour operator businesses will be closely pegged to the level and reliability of future bookings, the loyalty of the customer base, and the terms on which bookings are made. Buyers can reasonably expect sellers to provide a detailed breakdown of bookings, customer contracts, and how deposits and other funds are held.

Sellers should prepare data in advance, showing the volume of historic cancellations and trends in customer complaints. This information should identify the extent to which the business is impacted by credit card chargebacks and s75 Consumer Credit Act claims. The buyer should make enquiries into the extent of any ongoing liabilities for customer complaints and insurance claims relating to delays or travel disruption.

Brand and reputational issues will be at the top of the agenda for buyers and investors in any tour operator business. The ability to convey trust, solidify customer loyalty, and ensure multiple repeat bookings is a key component in valuations. To strengthen their position in negotiations, sellers should be able to demonstrate clear ownership of intellectual property rights, including website domain names and trademarks.

Buyers will expect registration of these rights to be effective, not just in the UK, but in the international jurisdictions in which the business operates. Reputations in the industry can suffer dramatic setbacks from even isolated incidents. Buyers should, therefore, be satisfied that marketing campaigns, complaint handling processes, data protection protocols, and environmental credentials are all robust and transparent.

Tour operators handle vast amounts of personal data, and this is a valuable business asset. Buyers should check that customer data will be lawfully available to them after completion, and that any data sharing during due diligence and transition is structured and documented appropriately (including where the identity of the controller changes on completion). Equally, they should be aware of the significant financial and reputational risks associated with breaches of data protection law and cybersecurity threats. Data protection policies, resilience of booking platforms, the legal basis used for data processing, and the implications of transferring data internationally should all be assessed. Any gaps in compliance history or weaknesses in the target company’s approach to these matters should be addressed before completion.

We have outlined key areas to consider if you are thinking about buying or selling a tour operator business. However, this is just a selection of issues you may have to confront.

Depending on the target business, buyers and sellers may have to navigate TUPE regulations, international employment contracts, a range of warranties and indemnities and any national and international tax implications of the deal.

There is no doubt that real opportunity exists in the sector. But, as we have seen, there are significant hurdles to overcome in any proposed sale or acquisition. If you are contemplating entering or exiting the sector, get in touch. We have significant experience in this sector and recent deals include working with Travelopia, Ocean Holidays, and Martin Randall Travel. Without any obligation, we will go through your options and help you understand the legal and financial implications. The team of experienced merger and acquisition lawyers at DMH Stallard has all the resources and expertise you will need, with support from experts working in Real Estate, Employment, IT and Tax.