I anticipate acquisition activity will be strong over the next few months. This week Volvo Rents and Delta Rigging & Tools made acquisitions; a week or two ago it was RSC acquiring another aerial company in the northeast.
Speaking of acquisitions, the king of them all in the history of the rental industry is Brad Jacobs, founder of United Rentals and architect of its dramatic consolidation spree that changed the industry. When Jacobs left United Rentals, he had the intention of finding a new industry to invest in. It took him a number of years, but Jacobs eventually became fascinated with the trucking industry and invested $135 million into Express-1, a third-party logistics transportation services provider.
Jacobs explained to me that there are literally hundreds of thousands of trucking companies in the United States, and when seeking trucking services, companies — such as manufacturers, industrial and retail firms and, indeed, equipment rental companies — can waste a lot of time looking around trying to find good deals with trucking companies. However a breaker can find you the services you need and also arrange freight forwarding, which involves trucking the equipment — or whatever the item that needs to be transported — from Point A to a port or airport and sending it abroad.
I would have guessed that a high percentage of trucking services is done this way but according to Jacobs it's only about 15 percent. Hence a huge opportunity for further penetration and growth, the same principle that governs the rental industry. If the rental industry provides better and better services, penetration of rental will continue to grow. Clearly Jacobs is banking on the concept that if third-party logistics providers improve the depth and quality of the services they offer, they'll penetrate that market, which is far more fragmented than the rental industry was when Jacobs entered the industry.
Some might say Jacobs has a Midas touch. Nobody who knows him is likely to bet against his success in his new venture, just as he obviously made significant returns on capital invested in the oil industry, waste management and the rental business. But it bears understanding that the man doesn't just snap his fingers and come up with brilliant ideas. He spends years researching and preparing before launching a venture and, as he told me, he looked into hundreds, perhaps thousands of industries before deciding on this one.
