Exclusive: “What will emerge is a new type of company, doing a new type of business”
Don’t get used to the name “NewALD”. In an exclusive conversation with Fleet Europe, Tim Albertsen (CEO, ALD) and Tex Gunning (CEO, LeasePlan) reveal that will not be the name for the company that will emerge from the acquisition of LeasePlan by ALD. What it will be, remains to be seen – as much else about the massive, industry-altering deal.
Last week, ALD announced that it would acquire LeasePlan for €4.9 billion. ALD’s parent Société Générale will own 53% of the new company, LeasePlan shareholders just under 31%. While not a surprise – both companies had been in talks for months – the deal is likely to have a major impact on the fleet and mobility market.
1. The deal itself
Tim Albertsen: “This was a historic opportunity for our two companies to join forces. ALD and LeasePlan make for a very strong combination, with a promising future. It’s a very good deal for our shareholders, our customers, the market, and for the speed of technological development in our industry.”
Tex Gunning: “We are very happy that ALD has signed an MoU to acquire LeasePlan. It’s a big and complex deal, so that in itself is an achievement. But it’s also the right time: the mobility market is exploding. I’m convinced it will be the world’s hottest industry for at least the next 5 to 10 years. The potential of our combined businesses is fantastic, and will create one of the world’s leading mobility companies. We think this is a massive plus for our customers.”
Why does the deal take the shape of an acquisition instead of a merger?
Tim Albertsen: “In practical terms, it will be a merger: we will take the best of both companies, and combine it into a new and different entity. In strategic terms, however, Société Générale has identified the mobility space as an important growth area, and indeed, sees the combined new entity as its new, third pillar, next to retail and investment banking. That’s why Société Générale will remain a controlling majority shareholder in the combined company.”
“The takeover would not have been possible without our IPO of a few years ago. As for LeasePlan, it was owned by a consortium led by private equity, so you know that ownership ambitions are less strategic in the long term. From that perspective too, this deal makes sense.”
Talking about the best of both companies: which bits are those?
Tim Albertsen: “ALD and LeasePlan have a similar entrepreneurial culture, and we’re both leaders in our industry. But ALD has put more effort into partnerships and private leasing, while LeasePlan has been more focused on the corporate segment and last-mile deliveries. The combination is an excellent fit to tackle the future.”
This deal also means LeasePlan will disappear. Tex, does that affect you emotionally?
Tex Gunning: “I don’t see it that way. For me, the new company we are creating will allow LeasePlan to grow further. As has happened previously in our history. LeasePlan has been acquired by a bank, then by Volkswagen, and now by ALD. Each time, in response to market challenges. Each time creating an opportunity for growth.”
Tim Albertsen: “What will emerge is a new type of company, doing a new type of business. It’s not just the sum of two companies specialised in full-service leasing or business mobility. So no, the new company will definitely not be called ‘NewALD’. We don’t know what the new name will be. But we do know that we will be of a size and in a space to compete on the mobility market with the Googles and Apples of this world.”
Your initial press statement said the new company will focus on its 12 most important markets. Which are those?
Tim Albertsen: “We have some ideas, but not an overall picture as yet. We will set up an Integration Management Office, which will define the interim operating model on a country-by-country basis. That will be the model until the deal closes and the actual integration begins.”
In the U.S., ALD has an alliance with Wheels Inc and LeasePlan has its own subsidiary. Which path forward will the merged company follow?
Tim Albertsen: “We’re not jumping to conclusions. All I can say at this point is, ALD does not know the U.S. market very well, although LeasePlan USA seems to be doing well. We also have a very successful long-standing strategic alliance with Wheels-Donlen. It’s too early for decisions, those will be taken when we’re nearer the closing of the deal.”
In terms of synergy, you state that there will be an annual windfall of €380 million. Will that primarily benefit shareholders or clients?
Tim Albertsen: “There will be synergies in terms of cost, facilities and IT. The biggest synergies will be on the procurement side, where we will benefit because of our bigger size, and the ability to align our requests. Our firepower will be doubled, so to speak. That will put us in a better position to capture growth and invest in our development and will clearly benefit shareholders, clients and employees. Additional synergies will be analysed by the Integration Management Office during the course of the year prior to closing in Q4 2022.”
ALD has the ambition to electrify 50% of its fleet by 2030, while LeasePlan wants to achieve 100% electrification by then. How will you compromise?
Tex Gunning (joking): “I have a simple proposal. Fifty plus one hundred is one hundred fifty. Divided by two is seventy-five. So: 75%.”
Tim Albertsen: “Electrifying 100% of our combined portfolio would be too ambitious. On the other hand, our own target of 50% is probably too conservative. So I must say, Tex: your proposal of a 75% target is not a bad pitch and one I could be in favour of!”
What are your ambitions for digital service delivery?
Tim Albertsen: “ALD and LeasePlan both have the same ambitions when it comes to offering full digital services to our customers. However, where we have been developing a lot of digital solutions on our front end, LeasePlan has put a lot of effort into its digital back-end architecture. I see that potentially becoming the backbone of our unified global digital model and will look at this closely during the integration preparation period. The combination of our front-end and LeasePlan’s back-office would be a very powerful solution.”
Tex Gunning: “You can’t have a digital front end without a digital back end. That’s why we developed our Next Generation Digital Architecture, which we’ll be rolling out over the next five years – starting with the UK, Portugal and the Netherlands, and as soon as those pilot markets are successful, to other markets as well.”
LeasePlan retains a special relationship with CarNext, its online used-car subsidiary, recently sold to Constellation, the parent of BCA. How will that change?
Tim Albertsen: “The combined entity will adopt LeasePlan’s agreement with CarNext. So, this deal also helps increase our own remarketing capacity but won’t replace it. We will maintain ALD Carmarket, our own used-car remarketing channel. However, CarNext may present another opportunity to develop used-car leasing for the private market.”
Can you outline the next steps in the integration process?
Tim Albertsen: “First, we define the interim operating model on a country-by-country basis. After closing – at the end of this year – we start the actual integration process to achieve our new global operating model. We target completion of the integration project in the top 12 countries within 18 months and an additional 12 months to complete the remaining countries by mid-2025. We also envisage rebranding the entity.”
In the meantime, will ALD and LeasePlan compete or collaborate?
Tim Albertsen: “Until the deal closes, everything stays as is. That means we continue competing – perhaps even a bit more vigorously than before, just to see who can end with the biggest slice of the cake (laughs).”
Aren’t you concerned that some of your customers may have questions about ALD and LeasePlan’s focus on delivering quality customer service during the transition?
Tim Albertsen: “The feedback of ALD customers has been very good, and Tex will confirm this is also the case for LeasePlan customers. No doubt, a transaction of this size is likely to create some disruption. That’s why we have set up an Integration Management Office, which would focus solely on achieving integration. The office is independent of both ALD and LeasePlan, and will have plenty of resources. Meanwhile, both ALD and LeasePlan will still look after our customers, ensuring high service levels, and keep innovating, like we’ve always done.”
What about customers who work with both of you in a dual supplier model, and are not keen on dealing with you as a sole supplier?
Tim Albertsen: “Customers in that situation or who cannot use us as a sole supplier may indeed want to look for an additional supplier. However, we looked into it, and that kind of overlap is actually surprisingly small.”
And what about the antitrust regulations? Will they cause problems?
Tim Albertsen: “We don’t think so. The mobility market is actually quite fragmented. And with OEMs getting active in this space – and in some markets already larger than our combined entity, I don’t anticipate any major problems in this area.”
And finally, Tex: Will this be your last dance, and how do you see your role and the legacy of LeasePlan in the new company?
Tex Gunning: “My role is to help and support Tim as best I can throughout this transition period. As for afterwards: I’ve learned in my career never to speculate on where you will end up next. We will see. And with respect to LeasePlan’s legacy: I hope the new company can continue with our affiliative corporate culture – that is to say, one that places importance on social and emotional connections between our people. Not only is that fun to work in, I think it also achieves better results than a purely transactional corporate culture.”
Authors: Steven Schoefs and Frank Jacobs.