Leasing mergers: Does buying beat building?

The recent acquisition of First Fleet Corp, a Fort Lauderdale FL-based financial and operational support company for the trucking industry, by Sparks MD-based PHH Arval, a leading car and small truck management company, is a part of a consolidation trend in the truck leasing market.

"I think this acquisition makes a lot of sense," said analyst Jeff Chung, vice-president of USBX Advisory Services, noting the transaction brings PHH's cars and light trucks together with First Fleet's medium and large trucks. "Instantaneously, it expands their market to a whole another group."

First Fleet is projecting its annual sales of $150 million will rise to $250 million in three years as a result of the deal, said Scott Mishoe, First Fleet's senior vice-president of marketing. With a larger balance sheet, First Fleet can now more effectively purchase trucks and lower internal costs, he said.

"PHH has a huge network of services in their operation, and we bring to PHH the ability to get into the heavy side of truck leasing," Mishoe said. "It's probably one of the best marriages we could hope for."

Chung added that there are advantages to large companies seeking acquisitions as opposed to expanding. PHH's acquisition immediately gives it a strong foothold in the market of medium and large trucks, rather than pouring resources into building its presence in the market from scratch, he said.

"In many cases it is easier to buy rather than to build. It gives PHH credibility and a consumer base in the (heavy truck) market," Chung said.

PHH's acquisition follows Ryder System's acquisition of General Car & Truck Leasing in 2003 and the current finalizing of its purchase of Ruan Truck Leasing. This in turn follows Penske Truck Leasing's purchase of Rollins Truck Leasing in 2001.

TAGS: Leasing
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