A vehicle for growth

EQUISTONE WAS AN underbidder for Nexus, a Leeds-based vehicle hire platform back in 2018, when it was acquired by a rival private equity firm in a tertiary buyout. But Will Copeland and his colleagues Andi Tomkinson and Sebastien Leusch remained keen, so when it came up for sale again in late 2022, they were able to move quickly. 

 “In some cases,” says Will Copeland, “if you miss out on an opportunity to invest then you may have to accept that you missed that boat – but not with this one. We knew that there was significantly more growth potential in this business. We had a good appetite to invest at the time and saw exciting growth potential despite the business being slightly below our typical investment size. We kept in touch with the business, its stakeholders and the familiar local advisors in the region. 

There were plenty of reasons why Equistone remained interested in Nexus. 

Founded in 2000, the company was a child of the original dot.com boom; and had grown into the UK’s leading B2B vehicle rental aggregator platform. Its rental management technology platform IRIS connects its customers with 235+ vehicle suppliers, giving access to more than 550,000 vehicles. It had consistently gained market share, selling direct to corporate businesses, as well as leasing companies and brokers.

It had many features of an excellent private equity investment: a capable and experienced management team; a strong and consistent financial track record (19% compound annual growth rate over eight years), comfortably surpassing the wider UK B2B rental market; it’s business model is strongly cash-generative and did not require high levels of capital expenditure; its asset-light business model provided for agility and lower risk during a recession. And it did not have any direct competitors. “It ticked a lot of boxes,“ says Will.

The team was aware that there would be high levels of interest in Nexus – this was not just a case of dusting down the earlier plan.

“We did further work on the addressable market and could see that not all of the growth plans that we had originally developed had been executed. We could see that its owners and management team had done a great job, but there was still runway to grow the business in its core market and in new adjacencies. Although we had our own clear angle on the business, we anticipated tough competition, with other private equity houses and strategic buyers who were very interested.”

On the day before the sale process was officially launched, an unexpected fiscal and economic bombshell came in the form of an ill-fated mini-budget from Westminster. Market turmoil followed, with sterling falling to record lows against the dollar and sharp rises in the cost of long-term government borrowing. Amid the turbulence, investors and debt providers gave the UK a wide berth – this effectively slashed the number of prospective bidders. “There were several equity and debt providers not willing to look at new UK opportunities because of the uncertainty caused by the mini budget. We understood the drivers behind the desire to sell and why it had not been put on hold,” Will recalls. “We also had our prior knowledge of the business, we had built conviction around our investment thesis and we had full confidence in the management team.”

Meanwhile, Equistone’s relationship with the incumbent lender Ares was another important factor. “We knew how much they liked the business and that, while some debt providers were closed for new business, we had the first-hand knowledge that Ares would still be in there. So, despite the macro-economic turbulence, we decided to proceed, but sensibly. We knew that we could be a credible buyer who could deliver in relatively short order.”

When the formal sale process launched in late October, Equistone went straight into top gear.

“It comes down to your conviction. If you like something, you have to really go for it,” he says. “You must demonstrate your capacity to deliver and your seriousness of intent. If a seller sees a buyer moving at pace and hitting the milestones, that builds credibility and trust and gives them confidence.”

The team also faced robust challenge from the Equistone Investment Committee, given the wider political and economic issues that were roiling the UK at the time, and doubled-down on due diligence, including an in-depth customer referencing process.

It is early days, but Will has been encouraged by the performance of the business so far – it is 25% ahead of the budgeted underlying EBITDA for the year-to-date. There is a clear, defined organic growth strategy because there is still significant headroom in the core UK vehicle rental market, which is worth £2.9bn, and one in which both customers and suppliers highly value Nexus.

New products and services are being launched. Nexus Go is a new taxi booking service for shorter journeys and duration; Nexus Connect is a mobile app that streamlines the rental process for end-users whilst on the move. Nexus will be at every point in the mobility cycle: it is strongly positioned to exploit the development of mobility as a service, bringing together services such as vehicle rental, public transit, and taxis into a single offering.

Several new initiatives will also drive growth. Nexus diversified into the plant hire market, providing powered access, power and lighting equipment and plant vehicles through its IRIS platform. It is a market that is still run on the model of the customer dealing directly with an individual supplier; Nexus could disrupt that in the way that it disrupted the vehicle rental market.

Then there are the opportunities for this established platform to be an aggregator in the domestic market, taking advantage of the trend away from vehicle ownership. An already powerful presence in a market with high barriers to entry, the strategic position and scale of Nexus looks set to strengthen.” ☐

A full version of this article appeared in PLATFORM 09, Summer 2023