United Rentals aquires Ahern Rentals in the US
America’s largest hire company, United Rentals has entered into an agreement to acquire the assets of family-owned Ahern Rentals for approximately $2 billion in cash. The transaction is expected to close prior to year-end 2022.
Founded in 1953, Ahern Rentals is the eighth largest equipment rental company in North America, with approximately 2,100 employees and 106 locations in 30 states serving approximately 44,000 customers in the construction and industrial sectors. Ahern Rentals generated $310 million of adjusted EBITDA in the 12 months to September 30th, on $887 million of revenue.
The acquisition is set to grow United’s EWP fleet size to around 180,000 units, and telehandler fleet to around 34,000 units.
“Our acquisition of Ahern Rentals supports our strategy to deploy capital to grow the core business and drive shareholder value. We view ourselves as the ideal owner of these assets within our network, as customers will benefit from the combination of the two organizations moving forward together. We’re leveraging our competencies in larger-scale M&A [mergers and acquisitions] to augment both our near- and long-term earnings power,” said Matt Flannery, United Rentals CEO.
“Our integration playbook is underway so we can prepare the acquired branches to take full advantage of our systems and operational capabilities, and gain from our employee and customer-centric culture. I look forward to welcoming our new team members upon the closing of the acquisition,” Flannery said.
Don Ahern, CEO, Ahern Rentals, said, “I’m proud of what we’ve built at Ahern Rentals over nearly seven decades, and I’m extremely pleased that the combination with United Rentals will take the business forward in this next chapter of growth. I want to thank our employees for driving the results that make this transaction possible. This is a strong outcome for both organizations and our customers.”
United Rentals currently plans to pause its $1.25 billion share repurchase program through the initial phase of the integration, consistent with its approach during the integrations of similarly sized general rental transactions.
The company also provided several points as the strategic and financial reasons for the deal, including:
- Consistent with United Rentals’ “grow the core” strategy. Customers of both companies will be better served by the combined scale, and legacy customers of Ahern Rentals will benefit from one-stop access to United Rentals’ specialty rental offerings.
- Complementary footprint. Ahern Rentals’ customer service footprint of branches, fleet and experienced employees is complementary with United Rentals’ existing network. The combination will increase capacity for United Rentals in key geographies, with concentrations on both U.S. coasts and in the Gulf region.
- Fleet expansion. The combination will expand the fleet available to United Rentals customers by more than 60,000 rental assets with an original cost of $1.85 billion, as well as approximately $145 million of non-rental fleet. More than 75 percent of Ahern Rentals’ rental fleet is comprised of high-demand aerial and material handling equipment.
- Business development. The integration of the acquired branch and sales operations represents significant opportunities to improve efficiency, productivity and new business development with the adoption of United Rentals technology and field management processes. Ahern Rentals and United Rentals use a number of the same technology platforms, including the RentalMan ERP system.
- Return profile. Return on invested capital (ROIC) is expected to exceed the cost of capital within 24 months of closing on a run-rate basis, with an attractive internal rate of return (IRR) and net present value (NPV).
- Cost synergies. The combination is expected to generate approximately $40 million of annualized cost synergies within the first 12 to 18 months of closing, primarily in the areas of corporate overhead, operations and cost of rentals due to efficiencies of scale. In addition, United Rentals expects to realize procurement savings based on the combined spending of both companies.
- Cross-selling. United Rentals expects to realize approximately $60 million of annual revenue synergies by year three, led by the cross-selling of its specialty rental offerings to an expanded customer base.
The acquisition is for Ahern Rentals and does not include other businesses that remain part of Ahern, such as Snorkel and Xtreme Manufacturing.