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Mergers and acquisitions: Maximise your value to potential buyers

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Paul Jones, partner at Clearwater International, looks at the commercial vehicle market.

Mergers and acquisitions in the commercial vehicle market are on an upward trajectory, but owners of businesses wanting to sell need to prepare and present their businesses to be attractive to corporate acquirers and investors.

Resilient throughout the recession, the commercial vehicle market is currently showing strong growth, as it continues to benefit from a positive macro outlook, increased vehicle outsourcing trends, and the combination of low cost and high availability of vehicle financing. As a result, the market is attractive to both investors and trade acquirers. We have seen this potential first-hand, after advising on Enterprise Rent-A-Car’s acquisition of Burnt Tree, one of the UK’s largest providers of commercial vehicle rental to private companies and public sector organisations.

The commercial vehicle market is highly price-competitive, but we’re increasingly seeing supplier differentiation through service levels and national capability. Customers will always want to see a good deal, but just as important is minimising vehicle downtime and efficient logistics for on and off hiring. As well as this, businesses have increasingly looked to extend fleet management activities to improve back-office efficiency. Rental companies that embrace such a corporate mindset, while delivering growth, will be the most attractive assets.

The Burnt Tree deal is a good example of a business which achieved strong growth while continuing to invest in people and systems to create a sustainable model with ‘HGV mentality’ – maintaining the fleet more stringently than competitors. This point of difference, with the company’s flexible rental offering, made it attractive to investors and resulted in Enterprise Rent-A-Car’s acquisition last year.

There are a limited number of national commercial rental companies of scale in the UK and, potentially, more buyers than sellers. So the key to maximising attractiveness to buyers is to present a well-invested infrastructure, with a well-managed fleet. For many acquirers, they are purchasing a platform, and infrastructure and management become key value drivers.

 

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