In all industries companies succeed by providing customers with good service and the products they want. When SG Fleet completes the acquisition of Leaseplan it will merge two very different organisations that have sales brochures offering the same products but in very different ways.
SG Fleet could be considered the government fleet manager with 34% of their vehicles linked to a government agency. They have a history managing the Tasmanian and West Australian governments, major electrical utilities and currently the NSW and Federal government fleets. The purchase of Leaseplan will add more government clients while providing some balance by adding more corporate clients plus locking in SA and TAS state government vehicles.
Leaseplan Australia has been different to other fleet management organisations for many years. Their product offer focused on corporate customers and some novated leases. Their Open Calculation operating leases provided customers with a transparent view of their operating costs and residual values. They adopted a partnership approach to fleet management through their products and systems which resulted in long term customer relationships.
The overall scale of the business will dominate the local market. Customers and suppliers will notice the separate entities combining into one.
Using data from the fleet insights survey conducted by ACA Research and VFACTS new car sales reports, its estimated that SG Fleet will manage 13% of the new car purchases by business and government each year. Or, 20% of all new car purchases by Fleet Management Organisations (FMOs).
Vehicle repairers and tyre retailers will notice the impact because Leaseplan and SG Fleet currently use different online systems to provide authorisations for vehicle maintenance and fleet tyre replacements.
Leaseplan developed its own system which is considered the easiest and quickest to use at no cost to the repairer. SG Fleet uses a system called 1Link which is also used by Custom Fleet and Eclipx.
Selling vehicles at the end of a lease is another process where Leaseplan and SG Fleet take different approaches. SG Fleet prefer a silent tender process which is managed in-house. They operate multiple warehouses and return locations around the country. Vehicle wholesalers bid for the vehicles and negotiate directly with SG Fleet staff. Leaseplan uses auctions which are transparent and open to a wider audience.
When a corporate fleet goes to tender, the big four (SG Fleet, Leaseplan, Custom Fleet, Toyota) would always be in the mix. They all offer operating leases and fleet management services but the ‘special sauce’ is what makes them different. And customers pick the one that best suits their requirements. After the acquisition, some of the other FMOs may get a chance to sell their ‘special sauce’ to organisations that are looking for a more tailored and personalised service from a smaller player.
There won’t be much change in novated leasing and salary packaging. Leaseplan has a small novated lease customer base and novated is one-third of the SG Fleet business. The combined novated will be 23% of the vehicles. The big salary packaging players are McMillan Shakespeare and SmartGroup will still dominate because they have specific solutions that cover a range of packaging products including novated leases.
SG Fleet has done this several times before, and as a public company the share price and shareholder returns will be the measure of success. If it takes several years to complete the integration of people, systems and customers the industry might not even notice the change.