The question is not if, but when. Word is several former owners and managers of acquired rental companies are mustering up capital, gathering their forces and planning to make their way back into the market once their noncompete contracts expire.
“It's starting to happen in the Pacific Northwest, because that's where consolidation started,” says Bob Kendall, president of Seattle-based Star Rentals (No. 26 on the RER 100). “You still see a lot of people tied to their noncompetes, but I predict that over the next two years, you will see more [people coming back.] It's just the tip of the iceberg what you're seeing right now.”
Noncompete agreements, which typically last three years and were enforced out during the height of consolidation from 1997-1998, barred these independent entrepreneurs from setting up shop in direct competition with the national companies that acquired them. Some owners cashed out and left the industry for good. But a number of former independents remained on the fringe, in some cases working with their former competitors or in other capacities within the industry. With many contracts expiring or due to expire within the next few months, whispers of comebacks are getting louder.
John Hoham of Temecula, Calif.-based Rebel Rents, No. 56, sold his company in the late 1980s and opened a new one six months later.
“Every time you come back, it's harder,” Hoham said. “But what else are you going to do really? It's not easy. Think about it, you've been on a cruise in the Caribbean and now you have to come in on a Saturday morning and work the counter because your counterman did not show up. You start thinking, why am I doing this?”
Just how many former independents might reemerge? Judging from the buzz at a recent major tradeshow, the numbers could be significant to shift the industry in another direction. The signs are already there. Consolidation has slowed down and lately, several national players are closing branches and laying off hundreds off workers.
“Since the big guys are so much in debt, there won't be any more growth,” Kendall says. “They have to get smaller, close some stores and create more opportunities for others. Based on what I've seen on the East Coast, there are probably enough people who are just itching to come back. They truly miss the industry. There's always a place for the independent in the industry.”
“We're seeing at least a couple of [new stores] opening a week throughout the country,” says Tim Cetto, president of newly-formed Pinnacle Capital LLC, Wenatchee, Wash. “Majority of those getting back are people with experience in the industry, either as managers who worked in a branch that was sold out, or owners. It's a small world out there and these guys are going to be the next leaders. They are going to bring a breath of fresh air into the industry and into customer service.”
Cetto's former equipment financing company, which he sold in 1997, also felt the ripples of industry consolidation when he lost a bulk of his independent rental clientele to the consolidators.
Some are not as optimistic should these former independents make a comeback. Joel Nikle, rental fleet manager of Fargo, N.D.-based Butler Machinery, No. 43, says he fears that additional players in an already product-saturated market will further drive rental rates down.
“We have not seen any of this [former independents coming back] in our territory, but I would think that anyone who has sold in the previous years, would want to think twice before getting involved again,” Nikle says.
“As competitive as this industry is, I don't understand why somebody who's sold his or her mom-and-pop store would want to start-up again. There are too many players in the market and way too much iron sitting out there. It will cost somebody.”
The response from many: “It's in the blood.”
TOP 10 LOCATION GROWTH
While the combined revenue of the top 10 companies continued to soar, location growth slowed considerably in 2000.
REVENUE VS. LOCATION GROWTH
Last year's dramatic shift from acquisition-based expansion to organic — or same-store — growth is revealed in a comparison of revenue and location growth for the top 10.
WHERE ARE THEY NOW?
If you're wondering about some familiar RER 100 companies that aren't on the list this year, here's the scoop:
