Despegar lays off 400, Best Day acquisition called into question

despegar lays off 400, best day acquisition called into question
despegar lays off 400, best day acquisition called into question

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Contxto – As you read this, trips around the world are being canceled, flights are grounded, and suitcases are stowed away for a better day.

Argentine Despegar was well-aware that quarantines everywhere would dampen its operations. And like many other businesses in the travel industry, Despegar resorted to layoffs as a means to cope. 

Last week, it let go of 400 employees distributed among Brazil, Uruguay, and Colombia. Because of labor regulations in Argentina, it could not fire staff in that country. Its deal to acquire Mexican platform Best Day is also being reevaluated and may not take place after all.

2020, a year to remember for Despegar and Best Day

In January, it was announced that Despegar would be acquiring Mexican Best Day for US$136 million. But since then, a pandemic has come along to shock the industry. As a result, Despegar has come forward to acknowledge it’s reassessing this acquisition. 

For the moment, it’s not dissolving the deal, which is also still awaiting approval from Mexican antitrust authorities. Although it is renegotiating the terms based on an announcement made by the Argentine business yesterday (13).

Based on these statements, Despegar is discussing with Best Day the valuation of the deal and payment timing. Moreover, there is even the possibility that the acquisition will not fall through at all. Take a read:

“The Company [Despegar] cannot assure you that it and the sellers will be able to consummate the acquisition of Best Day under the existing terms, under different terms, or at all.”

FYI, it’s bad and poised to get worse

Unlike Peru, Colombia, Argentina, and Chile, the Mexican government has yet to close its borders. It hasn’t even mandated quarantine, as is the case with  Despegar’s native Argentina. There, the government’s mandatory quarantine initiated on March 20 and has been recently extended to April 26. 

And at the moment there is no light at the end of the tunnel, as per the words of President Alberto Fernández:

Nobody knows when this agony will end.

This Latam country is Despegar’s third largest market. 

Although it may be more concerned with its two correspondingly largest markets: Brazil and Mexico. Both of which are governed by presidents that have been widely criticized for their delays in controlling the spread of coronavirus (Covid-19). 

Given the sizes of their populations, they are also the two countries with the highest number of cases of Covid-19 cases. Brazil reached 23,430 this week according to the country’s Health Ministry. Meanwhile its equivalent in Mexico announced it has 4,661 confirmed cases.

But due to the insufficient number of Covid-19 tests within these countries, many analysts state these numbers may actually be higher.

In short: the situation is far worse than we imagine and the pandemic may hit these major markets in Latam even harder.

What’s worse, given their key role as regional leaders and markets, slowdowns there will certainly spill trouble for the ecosystem’s startups as a whole.

Wanna hear more? We recommend you listen to the following podcast episode: Automatización vs factor humano. You can find the time stamp available in the description.

Related articles: Tech and startups from Argentina!


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