Insight: GE Capital purchase will take Arval to FN50 No2

Arval is poised to become the UK’s second largest leasing company after parent company BNP Paribas revealed plans to acquire  the European fleet management division of  GE Capital.

The deal would create a UK leasing operation funding more than 150,000 cars and vans, lifting the company above ALD, Alphabet and LeasePlan into second place in the FN50 (according to 2014 figures).

The memorandum of understanding is for GE Capital’s European business, which includes more than 160,000 vehicles in 12 countries – including almost 50,000 in the UK – with vehicle assets of €2.4 billion (£1.7bn) as of Q1, 2015.

It is expected to be completed in quarter four, subject to work council consultations and regulatory approvals.

The move is part of a global transaction under which Element Financial Corporation, Arval’s partner in North America, has acquired GE Capital’s fleet businesses in the USA, Mexico, Australia and New Zealand for around £5.5bn.

It comes less than a year after Element bought PHH Arval, then the USA’s third biggest fleet management company, which created the global partnership with Arval.

Jointly, the two organisations would manage more than three million vehicles in 40 countries.

The UK customer bases are likely to be complementary. GE Capital’s focus has been on the corporate sector since it took the decision five years ago to reduce SME funding, while Arval has enjoyed much of its recent growth in the small and medium fleet sectors, admitting to Fleet News that corporate had been more of a struggle to win business.

Bart Beckers, Arval chief commercial officer, told Fleet News that the acquisition was a way for Arval to “accelerate growth and become the number one player in full service leasing across Europe”.

He added: “If the transaction is completed, our customers as well as those of GE will benefit from even wider geographical coverage, our combined expertise and scale. Our purchasing power would be further strengthened, as will our services and IT platforms, which should result in tangible synergies that we can bring into the equation when optimising their TCO .”

The acquisition would also strengthen Arval’s fleet management service offering, according to Beckers.

“Most corporate clients use full service leasing solutions to satisfy their needs – funding, services and risk taken by the lessor on residual values and other services. Pure fleet management is sometimes used for niche segments.

“This transaction [...] is an interesting way to improve our geographical presence and weight, enabling us to translate this into even more competitive full service offerings.”

General Electric announced plans to sell much of its GE Capital assets – including its fleet management and commercial lending and leasing businesses – in April.

Private equity groups were quickly tipped by analysts as the most likely purchasers, although 12 companies were said to have signed Non-Disclosure Agreements for various part of the Capital business, including Element. The speed of the sale surprised onlookers, not least because the original GE announcement suggested a three-year timescale.

Last year, Arval became the fourth UK leasing company to break through the 100,000 funded-fleet threshold.

UK managing director Benoît Dilly told Fleet News in February that Arval should be aiming for market share of 8-9%, which equated to around 120,000 vehicles. In one swoop, he will oversee a business with a funded-fleet of more than 150,000, when the acquisition is completed.

The industry will then be watching to see whether Arval follows the examples set by Alphabet (when it acquired ING Car Lease) and Zenith (when it merged with Leasedrive) by retaining the majority of customers, or whether it takes a knife to the risk fleet like Lex Autolease when it brought together Lloyds Autolease and Lex Vehicle Leasing.