IRN JANUARY 2014
RENTAL MANAGEMENT PRIVATE EQUITY
Rental deals
The history of UK-based private equity company
3i is required reading for students of private
equity in rental in Europe. Its origins go back to
the UK government recovery plan after the 2nd
World War, although it has since raised money
on the London Stock Exchange and from other
investors around the world. It was for a while the
largest private equity fund in Europe.
3i is a shareholder in Loxam, and has been an
owner of HSS, the Meek Group, Universal Aerial
Platforms, Independent Access, Instant Access
Centres, all in the UK, plus the Lavendon Group
before it went to the stock market in 1996.
The old 3i model was to invest equity and debt
into a company, even a young one, and wait until
it was sold, even for a decade or more. Now, 3i
is doing less young company ‘venture capital’
and more transactions where it buys and sells
quickly. The most visible of these transactions
was probably when Go Airlines, which 3i acquired
from British Airways in June 2001 for £100 million
and then sold to Easyjet in May 2002 for £374
million.
HSS acquisition
In 2004 3i acquired HSS from the Davis Service
Group, then sold it in June 2007 to other private
equity firms, Och-Ziff and Perry Capital, who in
turn sold it to Exponent Private Equity in 2012.
Platform specialist AFI in the UK (and now
the Middle East as well) is also on its third
private equity investor. NVM invested in May
2004, Barclays Private Equity in 2007, and
Rutland Capital in June 2013. Each time the new
investor took the old investor out, and the new
investment was accompanied by an acquisition.
AFI is now the second largest platform rental
company in the UK.
Brazil saw a big investment in rental, with
Southern Cross Group investing “over US$100
million” in Solaris. This followed Mill’s stock
market flotation in 2010, and reinforced the
‘investability’ of the Brazilian rental market.
Ramirent sold its business Hungary to Danube
SCA Sicar, a Hungarian private equity fund.
Considering its size compared to Ramirent’s total
business, it is not a surprise to see Ramirent
concentrating on Northern Europe. But it is also
good to see another private equity investment
in the region, perhaps the first since Industrial
Access in Romania received an investment from
the Balkan Accession Fund in 2007.
banks are as difficult as ever to work with, despite
the supposed economic recovery. Indeed his fund
had acquired companies without any bank finance;
during the boom years before 2008 it would have
been unusual or even unthinkable for a private
equity company to undertake an acquisition without
using leverage from a bank.
Another private equity fund director based in
central Europe, also speaking anonymously, said his
fund had just made its first investment in the rental
sector. Part of the sector’s appeal in central Europe
is low penetration of rental, which points toward
room for growth.
They like the cashflow of the industry, including
the fact that rental fleet investment can be stopped,
or even reversed, to produce cash relatively quickly
in the event of a downturn, compared to other
industries.
The same fund director said there are secondary
buyouts and stock market quoted companies that
help provide exit possibilities. All discussions with
private equity investors sooner or later turn to the
ease and availability of an exit; selling the company
and realising the investment.
In the next few years the sector will certainly
see more investment from private equity, but
selectively. The past 12 months has already seen a
number of high-profile deals (see table opposite).
These investments will be all over the world,
which will help the industry develop and attract
investment from banks and suppliers, as well as the
private equity funds themselves.
Acquisition prices cannot be taken for granted.
High multiples will be reserved for the best
companies in the highest growth markets – and with
those that have the best exit potential.
IRN
Banks no longer want to finance
cash flow without extra support
from assets, especially because
growth can no longer be taken
for granted...and companies for
sale no longer have multiple
bidders fighting for them.
Our people make it possible.
“OUR CUSTOMERS
LOVE THE FACT
THEY CAN COUNT
ON SUCH GREAT
PRODUCTS WITH
FACTORY SUPPORT
TO BACK UP OUR
SERVICE AND
REPAIRS.”
TIM, Allmand customer
COMING
IN
2014
booth #62606
booth #4564
