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Google acquires ITA Software: The background briefing

Posted by Scott Kirsner  July 1, 2010 04:41 PM

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Since news of a possible deal first started leaking out in April, lots of people have been wondering whether Cambridge-based ITA Software, which gathers and organizes data about airfares and helps airlines run their Web sites, would be acquired by Google, stay independent and possibly go public, or get bought by someone else.

The deal went down this week — with Google paying $700 million in cash — just as travelers were packing their suitcases for the Fourth of July holiday.

Update: According to a General Catalyst document I obtained, that firm (one of the local investors that put money into ITA in 2006, when the company was already nicely profitable) invested $18 million in the company at a post-money valuation of $310 million; Battery Ventures of Waltham was the lead investor. The General Catalyst document indicates that ITA's investors made about 2.25 times their money on the ITA investment — not a home run, but an OK return for an investment that they held for just four-and-a-half years. (General Catalyst partner Joel Cutler hasn't yet responded to my request for comment.) The document indicates that, in 2006 at least, ITA's EBITDA margin (earnings before interest, taxes, depreciation and amortization) was in the 50 percent range, and that ITA's cost structure was "less than one quarter of the closest known competitor." The document went on to say that the company had already entertained numerous acquisition offers, and that General Catalyst also believed that ITA could "be a public company given its large market, disruptive technology and strong financial performance." (Well, that didn't happen.)

Here are five links related to the deal, ITA, and its founder, Jeremy Wertheimer:

- Google's official announcement: "Taking off with ITA" (also worth a look is the company's page on "Facts about Google's acquisition of ITA Software," which seems especially crafted to counteract fears that Google could become too big and powerful in the travel industry.)

- Back in April, I took a look at the cultural similarities and differences between Google and ITA.

- ITA founder and CEO Jeremy Wertheimer was on a panel I moderated last December about the "travel tech" cluster in Boston.

- In February, Fast Company wrote about the company's long-running project to create a brand new airline reservation system from scratch (not yet launched), in a story headlined, "Ready for take-off: At last, a flight check-in system that doesn't suck."

- In 2006, ITA brought in its first outside funding: $100 million in venture capital, from Battery Ventures, General Catalyst, Sequoia Capital, and others.

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Innovation and technology news that matters, on a new website from the Boston Globe, featuring Scott Kirsner and other original reporting.

About Scott Kirsner

Scott Kirsner was part of the team that launched in 1995, and has been writing a column for the Globe since 2000. His work has also appeared in Wired, Fast Company, The New York Times, BusinessWeek, Newsweek, and Variety. Scott is also the author of the books "Fans, Friends & Followers" and "Inventing the Movies," was the editor of "The Convergence Guide: Life Sciences in New England," and was a contributor to "The Good City: Writers Explore 21st Century Boston." Scott also helps organize several local events on entrepreneurship, including the Nantucket Conference and Future Forward. Here's some background on how Scott decides what to cover, and how to pitch him a story idea.

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