Ashtead Group plc
Ashtead Group plc
Incorporated: 1947 as Ashtead Plant Hire Company
Sales: £256 million (US$412.6 million)(1999)
Stock Exchanges: London
Ticker Symbol: AHT
NAIC: 532412 Construction, Mining, and Forestry Machinery and Equipment Rental and Leasing; 53249 Other Commercial and Industrial Machinery and Equipment Rental and Leasing
England’s Ashtead Group plc is a leading provider of non-manned equipment rental services with operations primarily in the United States and the United Kingdom. Ashtead is comprised of three core businesses: A-Plant, in the United Kingdom; Sunbelt, with principal operations in the eastern region of the United States; and Ashtead Technologies, providing specialized equipment to offshore oil and gas platforms in the Aberdeen, Scotland area and elsewhere in the United Kingdom. Together these subsidiaries provide equipment ranging from woodworking tools and other handheld equipment to forklifts, cranes, dump trucks, industrial pump and power generation systems, to highly sophisticated underwater testing and inspection equipment and other submersible equipment. In total, Ashtead’s inventory contains more than half a million rental items. The company itself is comprised of more than 350 branch locations—which Ashtead calls”Profit Centers”—situated in the United Kingdom, the United States, and the Far East. In the 1990s, Ashtead achieved impressive growth, rising from a small construction hire business to an international leader producing revenues of more than £250 million per year. The company expects to continue its expansion, particularly in the United States, where the equipment rental market remains highly fragmented and more or less undeveloped. Toward that end, in April 2000, Ashtead announced that it would double in size through the acquisition of BET USA, an American equipment hire business and subsidiary of Rentokil Initial plc. Ashtead is led by Peter Lewis, chairman, and George Burnett, managing director, who led a buyout of Ashtead’s original owners in the early 1980s.
Reinventing Renting in the 1980s
Founded as Ashtead Plant Hire Company in 1947, Ashtead largely concentrated on providing equipment rental (called “plant hire” in the United Kingdom) services to the construction industry through the 1980s. While profitable, the company remained a small, regional business. By 1984, Ashtead Plant Hire was posting annual sales of £1.5 million, with 60 employees working out of five branch offices, including Ashtead’s headquarters in Leatherhead, in Surrey, England. The company was typical of the equipment rental industry in the United Kingdom, which remained fragmented among a large number of relatively small companies.
In 1984, however, Ashtead was bought up by a group of investors, headed by the team of Peter Lewis and George Burnett, who took on the roles of chairman and managing director, respectively. Lewis and Burnett recognized the potential to build Ashtead into a national force, partly through internal growth, but also through acquisitions of other rental companies as the United Kingdom’s plant hire industry moved toward consolidation.
In order to fund Ashtead’s growth, Lewis and Burnett took the company public in 1986. The public listing enabled the company to begin its expansion. Through the rest of the decade, however, Ashtead remained linked to the construction industry, which continued to produce nearly 100 percent of Ashtead’s rental revenues. The United Kingdom’s construction market collapsed in the late 1980s—the result of the stock market crash of 1987, which revealed an over-saturated office building and hotel market, additionally crippled by the outbreak of the Persian Gulf War, helping to lead the United Kingdom into the worldwide recession of the early 1990s.
Ashtead was quick to seize on the new opportunities offered by a construction market reluctant to invest in new equipment purchases. The United Kingdom’s construction industry turned toward the country’s plant hire specialists for its non-manned equipment needs. By the late 1990s, more than 30 percent of the country’s construction industry were renting equipment, ranging from power hammers to fleets of dump trucks. As its U.K. business expanded, Ashtead looked overseas at the huge and highly fragmented rental market in the United States. In 1990, Ashtead acquired Sunbelt Rentals, an equipment rental provider with operations along the southeastern coast. Ashtead began extending Sunbelt’s reach farther up north, with locations growing from eight to ten coastal states. With the addition of Sunbelt, Ashtead became Ashtead Group; the company’s United Kingdom operations were renamed A-Plant.
At the same time, Ashtead began to reinvent itself. Recognizing that the construction slump was likely to continue toward the middle of the 1990s, Ashtead began looking to diversify its business in order to protect itself from the downturns and overall cyclical nature of its core market. In its diversification moves, Ashtead, breaking from the rental industry’s focus on the construction market, began to woo potential clients in other sectors, including industries such as the automotive and offshore oil industries, but also markets that were less vulnerable to business cycles, such as water utility operations and the equipment needs of local governments. As part of its new sales strategy, Ashtead began a series of major equipment investments, eventually boosting its catalog to more than 500,000 items. The company also invested in its sales department, doubling the size of its staff.
Building a Rental Powerhouse in the 1990s
By 1991, Ashtead was reporting annual sales of more than £31 million, posting a net profit for that year of £4 million. If the company’s growth since the buyout in 1984 had been impressive, Ashtead’s growth in the next decade was still more so. By the end of the 1990s, the company’s sales had leaped to £256 million, with a payroll of more than 3,700 employees.
In 1993, Ashtead launched a new subsidiary, Ashtead Technology, based in Aberdeen, Scotland. Ashtead Technology continued the parent company’s equipment rental business, with a specialized focus on the market for testing, inspection, analysis, and other equipment needed for the offshore oil and gas platforms near the Scottish coast. The Aberdeen location soon began providing equipment for the oil exploration industries in West Africa and South America as well. In the mid-1990s, Ashtead Technology opened a second branch office in Singapore, serving the oil and gas industry in Southeast Asia. Later in the decade, Ashtead Technology launched a third profit centre, this time in the heart of the oil industry in the United States, in Houston, Texas. By the late 1990s, Ashtead Technology had captured the world-leading position in its market. Despite its growth, Ashtead Technology remained the smallest part of the Ashtead Group, posting revenues of £9.3 million in 1999.
Ashtead Group’s largest growth came through its core equipment rentals businesses. The company’s growth was particularly strong in the United Kingdom, which saw more and more industries turning to equipment rentals for their machine tools and equipment needs. By the mid-1990s, Ashtead, through its A-Plant subsidiary, had succeeded in capturing some 13 percent of the total U.K. equipment rental market. By 1994, the company posted sales of £43.8 million, from more than 70 branch locations. Just two years later, the number of Ashtead locations had swelled to 164, providing nearly £96 million in revenues.
The company, which had grown in part through acquisition, in part through the establishment of greenfield sites, switched its acquisition drive into higher gear. Raising more than £67 million in fresh capital through a two-for-one rights issue, Ashtead went on a buying spree. In 1996, the company acquired Leada Acrow, adding that company’s 19 locations across the United Kingdom and Ireland. Purchasing an additional five branches in Ireland in October 1996, A-Plant took the leading position for the Irish plant hire market. That same year, Ashtead purchased McLean Rentals, doubling its Sunbelt subsidiary’s size and extending its reach from Maryland to Florida. With more than 24 profit centers, Sunbelt had built its share of the highly fragmented and largely undeveloped U.S. rentals market to one percent.
Further growth in the United States, however, was to come primarily through the establishment of greenfield locations, as Lewis and Burnett judged the prices of potential acquisitions to be too high. Nonetheless, with rental prices tending to be higher overseas, Ashtead looked to the United States as a primary growth market. By the mid-1990s, the company’s U.S. business had grown to more than one-third of its total sales.
Back home, Ashtead continued to consolidate its leadership position. As many of its competitors faltered, Ashtead’s early diversification moves gave it the flexibility to absorb the difficulties of the U.K. construction industry, just starting to come out of its long slump by mid-decade. By then, however, Ashtead had successfully reduced its construction industry contracts to just 40 percent of sales.
Ashtead’s good health enabled it to snatch up some of its competitors. In August 1997, Ashtead paid £39 million to acquire one of its chief rivals, Sheriff Holdings, adding 48 branches to boost its total number of profit centers in the United Kingdom to 204. By the following year, the company’s location list had grown to 275 locations worldwide.
We will develop Ashtead into an internationally based industrial rentals Group, meeting customer needs at a worthwhile profit to our enterprise in markets where we have scope to build a significant presence.
While continuing to enjoy leadership status in the U.K. market, Ashtead’s operations were developing more slowly. The U.S. equipment rentals market had remained fragmented through the first half of the decade. Yet, in the second half of the 1990s, a wave of consolidation began to affect the market, as a small number of Ashtead’s competitors began buying up other businesses, in turn driving up the cost of acquisitions among the industry. Ashtead, which lacked the funds for acquisitions in the United States, remained largely on the sidelines, concentrating instead on building organic growth through the opening of new branch offices.
By mid-1999, however, Ashtead’s position in the U.S. market had fallen to 12th among that country’s market leaders. Lewis and Burnett, fearing that Ashtead would be transformed into a marginal player, but lacking the funds to participate in the wave of consolidation sweeping the equipment rentals industry, began exploring more radical options for maintaining Sunbelt—and Ashtead’s—future growth. In August 1999, the company announced that it had hired management consultants Salomon Smith Barney to field purchase offers for Ashtead Group.
While shares in Ashtead soared after the announcement, employee morale suffered, and the company saw increased turnover in its workforce. Ashtead’s position on the sales block did not last long. In September 1999, share prices among Ashtead’s competitors, and especially those leading the industry consolidation, crashed. The sagging share prices also lowered Ashtead’s value—and the value of the merger offers it had received. Meanwhile, Sunbelt’s policy of greenfield growth had left it in good health relative to its more acquisitive competitors.
By early 2000, Lewis, who was preparing his retirement at the same time, announced that Ashtead Group was no longer up for sale and would instead maintain its independent course. The company continued, however, to target the United States for its strongest growth, announcing plans to more than double its business within three years and to capture a leading share of the rentals market in its southeast coast—stretching from New Jersey to Florida, and including Tennessee—core operations. These goals seemed near realization when in April 2000, Ashtead announced that it would purchase BET USA, an American subsidiary of Rentokil Initial plc, for £186 million cash plus £134 million in convertible notes. When finalized, the deal would double the size of Ashtead, making it the fifth largest equipment renter in the United States as well as the top such company in Britain. Moreover, Ashtead’s U.S. presence would expand to include 26 states. CEO Lewis noted at the time, that Ashtead would next look to make more acquisitions in the United Kingdom. Leadership of these expansion plans would likely be turned over to George Burnett in the 21st century, as Lewis was slated to retire in December 2000.
Ashtead Plant Hire Co. Ltd.; Ashtead Plant Hire Co. (Ireland) Ltd.; Ashtead Technology Ltd.; Ashtead Technology (South East Asia) Pte Ltd. (Singapore); Ashtead Technology, Inc. (U.S.A.); Sunbelt Rentals, Inc. (U.S.A.).
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- Company founded as Ashtead Plant Hire Company.
- Buyout led by Peter Lewis and George Burnett.
- Ashtead goes public.
- Acquisition of Sunbelt Rentals in United States.
- Establishment of Ashtead Technologies division.
- Company acquires McLean Rentals (U.S.) and Leada Acros (U.K.).
- Company acquires Sheriff Holdings (U.K.).
- Ashtead announces acquisition of BET USA, a subsidiary of Rentokil Initial plc.
“Ashtead,” Investors Chronicle, July 16, 1999.
Hyland, Anne, “Ashtead Goes in Search of Potential Suitors,” Daily Telegraph, September 1, 1999.
“Investors Vent Their Anger at Undisclosed Bids for Ashtead,” Independent, February 4, 2000, p. 19.
Lamsden, Quentin, “Taking Plant Hire to a Higher Plane,” Independent on Sunday, October 13, 1996. p. 6.
Larsen, Peter Thai, “US Hire Sales Look Good for Ashtead,” Independent, July 14, 1998, p. 21.
Pratley, Nils, “Ashtead Worthy of Its Hire,” Daily Telegraph, January 20, 1998, p. 27.
“US Constraints Force Ashtead to Plan for Sale,” Financial Times, September 1, 1999.
Wood, Martin, “Expanding Ashtead Has a Great American Dream,” Birmingham (England) Post, January 20, 1998, p. 19.
—M. L. Cohen