TOM Vehicle Rental has revealed plans to double in size following investment from a major private equity firm. Last December, international investment company Equistone acquired a majority stake in the growing rental business, which has 11 hire locations; six in Scotland and five in England.
Its investment came at the end of a year of successes for TOM, which was launched more than 25 years ago as an MOT station in Scotland where it continues to be based.
As part of an expansion programme last year, TOM secured a series of business wins, which included an extended deal with Scottish Water. It also launched a new ‘mega-depot’ in Birmingham and celebrated two of its new English depots reaching 1,000 vehicles on rent for the first time.
Its success drove the firm’s total fleet size to 12,000 vehicles (No 15 in the Commercial Fleet CF25), increased revenues by 49% to £213 million, and led to it rising from 247th to 106th in The Sunday Times Grant Thornton Top Track 250, a league table which ranks the biggest private mid-market growth companies in the UK.
With Equistone’s investment, this growth is set to accelerate, according to TOM Vehicle Rental CEO Robert Stewart.
He said: “We plan to open a number of new depots in strategic locations in the coming years to provide the infrastructure for a national supply network that supports the car, van, truck and trailer asset classes, and we expect to more than double our fleet size from 12,000 units in the next four-five years.”
He describes the investment as “transformational”, because it will provide the backing needed for swift expansion along with a wealth of expertise from Equistone’s management team.
Previous Equistone investments include Zenith Vehicle Contracts (now Zenith) in 2007, where it oversaw a doubling of profits and a 60% rise in fleet size, before it sold its stake in 2010.
During 2017, TOM is predicting organic growth, but Stewart believes the rental industry is ready for consolidation, particularly in the commercial vehicle market, which accounts for the majority of its business.
He said: “We expect to see consolidation within the UK vehicle rental market over the coming years, and particularly within the commercial vehicle sector, which is experiencing attractive growth drivers and is slightly less mature and more fragmented than other market segments.
“The largest commercial vehicle rental specialists may therefore seek to capitalise on this growth opportunity by gaining scale through acquisition.”
Flexible vehicle rental, mainly focused on commercial vehicles, is likely to remain a core focus of the business as it expands, but the investment is expected to generate growth in all its operations, including leasing and its five-site franchised dealer network that represents Mercedes-Benz and Citroën.
The Equistone investment also provides an important element of stability as the UK economy goes through unprecedented changes as the country exits the European Union.
Stewart added: “The investment creates an even more resilient TOM business, able to identify and capitalise on growth and development opportunities in a less predictable UK market than we’ve experienced in the past few years.
“The management team’s long-term vision for the business contrasts with the short-term, reactionary approaches, focused on cost reduction to the detriment of customers, commonplace during the last recession. This provides our customers with confidence of sustained service delivery.”
A lack of economic stability can often lead to increased demand for short-term rental, but the wider motor industry urgently needs a clear vision for a post-Brexit future, Stewart argued.
He said: “There can’t be any meaningful predictions about the long-term impact of Brexit, on either the economy or our sector specifically, until we have a concise trade road map from the UK Government. The Government needs to act quickly on automotive manufacturing, given its significant contribution to trade and overall UK employment in manufacturing in light of the heightened risk of material disruption it faces during the Brexit transition.”