Private equity firm Advent International, which acquired a majority ownership stake in Aimbridge earlier this year, has reached a deal to acquire Interstate Hotels & Resorts from investor Kohlberg & Co. and create the industry’s biggest third-party manager with a combined portfolio of more than 1,400 branded and independent properties and nearly 200,000 rooms open or under development in 49 states and 20 countries. Terms of the transaction were not disclosed.
Dave Johnson, co-founder and CEO of Aimbridge, will become CEO of the combined business based in Plano, Texas. Michael Deitemeyer, president and CEO of Interstate, will become global president, overseeing operations globally and corporate disciplines. The merged company will have an employee base of more than 60,000.
The deal came about, according to Deitemeyer, when Kohlberg started testing the waters to sell its stake. “When Johnson (a long-time friend of Deitemeyer) and Advent heard this it quickly evolved into a conversation and in short order became a deal,” he said.
Deitemeyer told HOTELS on Thursday that when the deal closes he will move back to Texas but the business will maintain an office in Arlington, Virginia. “We will figure out how functions merge and there is more work to be done in that regard,” he said. “With our combined growth will come a lot of opportunities to go around.”
He added that his initial focus will be on communicating to the combined team to see enough of the DNA of where they came from, be proud of where they came from and witness how they come together. “If I can align former competitors there is not anything we can’t accomplish,” Deitemeyer said.
Of course, industry observers and leaders were able to poke a few holes in the deal with one veteran executive telling HOTELS, “It seems like a lot of talented people could become available, which may be good for smaller operators. I do think competitive overlap and lack of visibility to senior management for smaller owner groups will create turnover in contracts when they become available. They will have huge scale advantages for procurement, brand negotiations, technology, systems and processes, so independent operators are going to have to up their game and develop a real brand strategy for themselves.”
Deitemeyer further stated how hard Interstate has been working to evolve and succeed at driving costs down for owners, as well as reenergize the talent pool. “Aimbridge is focused on similar things and our ability to go from 600 to 1,400 hotels is pretty exciting,” he said. “There are new opportunities we can offer our people and certainly opportunities for further growth. We will also be able to become even greater experts in hotel segments and put some real resources around differentiating our management offering is pretty exciting to me.”
Johnson said the new-found scale will ensure access to more robust data and the best talent to further differentiate the new group. “Personally, I am excited to work with Mike Deitemeyer, a good friend and well-respected industry leader.”
Johnson told HOTELS the two group’s portfolios (with close to 100 hotels under development) compliment each other well with Aimbridge having particular strength in Canada and the Caribbean, while Interstate has depth in Europe and, specifically, Eastern Europe. He intimated that both groups can take advantage of opportunities in the other’s strongholds to meet pent up demand from development partners. “The industry and economy is in a good spot right now so when we look at pipeline I am extremely optimistic,” Johnson said.
Until the deal closes later this year, the two companies will continue to operate separately.