European Car Rental Acquisition Integration
A private equity owned European vehicle rental company was acquiring the European division of a global competitor. While enough work had been performed up front to develop a reasonable valuation model, there had been minimal planning for integration and benefit realisation.
We were engaged to structure the integration programme and provide advice to the directors and teams responsible for executing the acquisition.
Act as the Integration advisor to the MD, Group FD and the Directors of the combined business. Our responsibilities included:
- Developing the programme governance framework
- Coaching people on their integration roles and responsibilities
- Setting-up and mobilising the integration programme
- Setting-up and managing the Integration Project Office
- Leading functional teams to:
- Understand Day 1, Transition and Transformation requirements
- Identification, validation and prioritisation of cost and growth synergies
- Review operating model and change roadmap for the combined business - locations, processes, technology, etc.
- Developing new organisational structure and group operating model
- Consolidating and supporting execution of the overall 100-day transition plan
- Identifying risks and issues, and helping the management team mitigate them
- Working with key stakeholders to help the UK MD and Integration Director build engagement for the key integration changes and helping them to manage the internal politics
Our client acquired a North American competitor’s European businesses for an enterprise value of €600m, including a transatlantic alliance for intercontinental sales. This enabled our client to become the leading rental operator in the UK, and further strengthened the existing position it held in Europe. In addition, the transatlantic partnership enabled our client to gain increased access to the US market and take advantage of cross border rentals.
The acquisition enabled synergies to be achieved by:
- Growing the B2B customer base
- Optimising Fleet Management through a shared fleet
- Sharing operational best practices
- Headcount reductions in IT and Operations
Business Challenges - How These Were Addressed
|Operating Model Changes||
|Private Equity Ownership||
|Lack of Synergy Detail||
- Helped the functional teams develop strategic plans that were consolidated into an overall operating model framework and the strategic rationale for the deal
- Achieved a structured integration approach which enabled the client to prioritise the integration activities – faster execution, greater benefits and lower risk
- Provided more accurate and structured governance and reporting, focusing senior management time on mitigation of key issues / risks
- Identified and quantified double the synergies compared to pre-deal assumptions
Examples of Specific Contributions
Integration Governance and Management
At the point RitchieHogg were engaged, only the most limited integration planning had been performed. This included the structure and planning of the integration programme. One of our first actions was to establish the core project requirements of:
- The Strategic Rationale for the deal - Why is the acquisition being made, and what benefits are expected? What are the Value Drivers for the deal and how do these inform the subsequent decisions within the programme?
- Integration Programme Structure - Establishing the governance bodies within the programme, including the steering group, project leaders and workstream level governance meetings.
- Establishing the Integration Programme Management Office - As our client was not a project focused organisation, they did not have a standing change organisation. We established a small and effective PMO team, establishing the standard Risk, Issue and Reporting disciplines, to oversee and manage programme planning and tracking.
A regular cadence of project reporting was established, with weekly workstream meetings and monthly workstream lead and steering group meetings. While the programme was established, these senior meetings were held more frequently.
Clear integration roles and responsibilities were established, with an Integration Director being appointed as the accountable executive for achieving the goals of the deal. The workstream leads were the functional directors of the business, accountable for achieving a set of specific synergy opportunities and change projects. As these workstream leads were also responsible for their ongoing business responsibilities, typically they appointed trusted deputies to deliver the workstream projects.
The RitchieHogg team supported each workstream with advice and best practice around developing business cases for synergy projects, as well as support in the ongoing execution.
Financial Planning, Tracking and Reporting
The Group Financial Director was concerned that there was no mechanism for planning, tracking and reporting on the financial progress of the integration.
We developed a structured end-to-end approach for this, taking the currently committed business plans, and layering the prioritised synergy projects over these to develop a consolidated financial plan for the business and integration.
Alongside this model, we created the business case templates to ensure a consistent approach to the development, tracking and reporting of the synergy opportunities and other projects, such as operating model changes. Actual results were layered on top of the ongoing business plan to track:
- Business As Usual (BAU) performance
- Synergy actual results
- Integration costs
- ‘Embedded Benefits'
The concept of 'Embedded Benefits' was established as an agreed mechanism to track variance from the BAU business performance, but which could be reasonably argued to be aligned to the impact of the integration on the business, whether positive or negative.
This approach allowed the business to meet its external obligations in terms of:
- Private Equity controlled board reporting
- Business performance KPI reporting
- Financial tracking and EBIT reporting for statutory accounts and audit
- Intra-group recharges
- Determining cost of financing for fleet acquisition
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