Scale, outsourcing and salary sacrifice are the three big components that convinced Bridgepoint to invest in the contract hire and leasing sector, according to Emma Watford, partner, head of business services sector.
The private equity firm, which acquired Zenith from HG Capital for £750 million in January, highlights the trend towards fleet outsourcing and the popularity of salary sacrifice, plus the fact that Zenith has the scale to maximise the growth opportunities.
Watford, who now sits on the Zenith board, told Fleet News that the leasing sector was an “attractive market”, adding: “The outsourcing trend from corporates in regards to fleet management and the continued growth in salary sacrifice were compelling.
“Bridgepoint invests in businesses in growing markets that we think are best in class and have best in class management teams. That played into our investment [in Zenith].”
Watford’s priority is to continue supporting Zenith’s organic growth in funding and fleet management. She points to the company’s focus on developing its IT systems, which has helped it to secure much larger fleet contracts.
“The size of the customer Zenith is winning is of a different scale than it would’ve been able to win 10 years ago, which is testament to its progress,” she said. “And its technological improvements lead it to be nicely differentiated in the market.”
Bridgepoint has no pre-planned acquisition targets but doesn’t rule out making additional investments in the future.
“The right M&A is a sensible move for any of our businesses. So we expect to look at some M&A over the coming years,” said Watford.
As a clear signal of those intentions, within a month of the announcement, Bridgepoint acquired truck leasing and fleet management company CVL, adding a new skill-set to the business and enabling it to now fund and fleet-manage assets from cars to vans to trucks.
Watford explained: “CVL brought something very different – the opportunity to offer the whole automotive solution to the customer, so it is a highly strategic move. We see Zenith as a technology-led solutions player so our focus is on rounding out that solution further to give the customer a one-stop shop for automotive.”
She added: “There are also other adjacent sectors that we can look to move into.”
Bridgepoint is the fourth private equity firm to own Zenith in the past decade. Each has left its mark: Equistone took Zenith into salary sacrifice in 2008; Morgan Stanley helped it to invest in securitisation in 2011, giving it broader, unlimited funding for vehicle assets; HG’s focus was consolidation – Leasedrive and Zenith – and IT investment.
Watford said Bridgepoint’s ambition was to make Zenith a one-stop shop as a technology-led automotive solutions provider. The CVL acquisition is a “building block” within that strategy.
“In four or five years’ time, it will have even more of a holistic offer to a more holistic group of customers,” she added.
The strategy will continue to be driven by the current management team, including chief executive officer Tim Buchan and chief financial officer Mark Phillips. Watford is one of two Bridgepoint directors to sit on the board in a role she described as “engaged non-executive directors”.
She added: “We are backers of management teams and we back Tim and Mark to deliver their plan. Our role is to engage strategically in how the business develops.”
Zenith has long talked about its European aspirations and has partnership relationships in mainland Europe, enabling it to offer funding solutions in 11 countries. However, Bridgepoint has no plans to formally expand the business outside the UK.
“There is huge potential in the UK market and that’s where our focus is,” Watford said. “Europe and the US are very interesting markets. Would Zenith be part of a more international business? Probably, but under our ownership, we don’t know. We are focused on the opportunity in the UK as it’s so compelling.”