18 Oct 2012
One year ago, the business mobility provider Alphabet purchased the Dutch car leasing business ING Car Lease (ICL). European CEO spoke with Norbert van den Eijnden, CEO of Alphabet International, about the background to the acquisition and its development.
Van den Eijnden has been working in the fleet and leasing industry for many years, and has been responsible for the management of the BMW Group subsidiary Alphabet since 2009. Since the purchase of ING’s fleet leasing division in October 2011, van den Eijnden has been leading the company in a dual directorship structure with the previous ICL CEO Ed Frederiks.
What was the background to the acquisition of the ING subsidiary?
We have been experiencing huge changes in the field of mobility for some time. While the private demand for cars is growing rapidly in markets like China, in Europe the market is stable. For young people in urban areas, the use of different modes of transport is becoming more and more important. They may no longer necessarily want to own cars, but they certainly don’t want to do without them completely. The growing number of company cars and the trend towards car sharing indicate an increasing demand for non-personal cars. As a result, we expect a positive development in the field of business mobility in the coming years.
To take advantage of various opportunities, size really matters, especially when operating on an international level. The industry will therefore consolidate further. We think that medium to long term, only a few large business mobility providers will remain in Europe. In this context, companies for which business mobility is not their core business will opt out – like banks for instance. For Alphabet and our parent company, business mobility is core business. Therefore, we decided on a strategic investment and in ICL we found the perfect match for the acquisition.
What made the acquisition of ING Car Lease right for Alphabet?
The respective key markets complemented one another. As a result, the new Alphabet is one of the top providers in the industry and has a strong position in all important European markets. Along with the geographical aspects, we were able to further expand the service portfolio. Our multi-make profile is significantly stronger – other car makes besides BMW and MINI now make up more than a 70 percent share of all leased cars. We have also increased the number of financed cars to more than 490,000. Through the acquisition, we have the know-how and the size to take on upcoming challenges in the area of business mobility.
Did strategic decision-making play a role in guiding your final decision?
Yes it did. As a BMW Group subsidiary, we don’t make decisions based on instinct.
Preparation and planning are part of our culture. A detailed insight into the market is an additional factor. As in every industry, the participants know each other very well. Occasionally, management discuss and monitor each other’s progress. When our strategic decision on inorganic growth became clear, we had a good idea of what we wanted. We knew roughly the minimum and maximum size that the candidate had to be; in which markets it should be present and which portfolio strategy it should follow.
On this basis, six or seven big players on the market came into question. With the help of a specialised commercial bank and advisors, we then analysed the options in a strategic study. Here, hard facts such as overlapping and additions to the portfolio, as well as soft facts like corporate culture and the significance of the headquarters played a role. We took the time necessary for the assessment. That was important for all of us in the management team.
You have to be realistic and preferably invest more in the preparation than provoke lengthy problems during integration. It took approximately 15 months from the beginning of the analysis and the first discussions with candidates to contract negotiation and the final signing: an effort we consciously took on. For us, ultimately, it was about creating a new company as a sound foundation for our future.
To what extent has Alphabet now become a new company since the purchase of ING Car Lease?
From a legal perspective, it amounts to an acquisition. However, we are pursuing a transformational approach. That actually affects the internal terminology. Within the company, we refer to it as a mutual integration. This is also how it is perceived by our employees. The crucial point of the transformational approach is to create a new combined company. During an integration process, new structures, procedures and values, as well as an own culture are developed.
From our perspective, our approach makes sense for many reasons. First of all, the industry and market are changing in general. Innovative and intelligent solutions above and beyond the classic company car are in demand. We are therefore expanding our conception of ourselves, so that changing needs can continue to be satisfied. Additional products and services speak for a combined company approach, as do the comparable size and complementary special-know-how in the finance and automotive industry.
The previous structure of both companies also supports this approach: from the complementary sizes and presences in the respective countries to integration with the parent companies. If at times carve outs are necessary or new processes and organisational entities have to be created, these are opportunities that have to be taken advantage of. Working together to develop something and to establish something new creates a bond. The prerequisites are clear goals and planning as well as transparency in communication.
How is that carried into implementation?
Being assured and providing assurance is key. We had a clear decision early on by BMW Group for an acquisition. That meant not only the support of all key departments, but also access to necessary resources in preparation for the integration. In the core team, we generated a concept of the new Alphabet. The blueprint for the present company originated from that concept. The blueprint was based on a business case, which contains detailed multi-year planning and forecasts up to 2017.
We were able to make many decisions in advance and in the course of the acquisition, communicate at the earliest opportunity. From our experience with other acquisition and merger projects we know that planning is important. Just as important however, is the ability to react to changes. We decided to bring a number of experts in change management on board. Otherwise it was a classic project build up with specialised teams, defined milestones and task lists. Everything was broken down in detail to individual employees and themes so that everyone knew exactly what had to be done.
What roles do communication and transparency play in these undertakings?
They are the core of success. In our business, good IT systems and motivated, highly qualified employees count. Technology can be replaced, employees with their know-how and lengthy experience cannot. It was pivotal for us to be open with employees and present our approach to them. After signature of the contract, a team built around Ed Frederiks and myself flew into every country. We explained the purpose of the acquisition, presented the essential features of the growth strategy and delivered our vision for the new Alphabet. We also made it clear that all employees would be kept on. We demonstrated our future direction and that we are committed to solving the challenges that arise.
After closing, we took the next step and flew back again to the countries to start the process and make its operation transparent. Whatever was decided upon was clearly communicated to the employees. We also encouraged all employees to participate. New values and corporate culture are an example of this collaboration.
How do you evaluate the course of integration up to now?
During the ongoing process, in the past year we were able to increase our business by approximately eight percent. So far this year, our forecast growth is on track. Integration has been completed in key markets and is moving in the right direction in others. In addition, an employee questionnaire yielded particularly positive results.
What are the factors that contribute to this development?
Precise and sound objectives, exact planning and a realistic approach to implementation. No false expectations, reaction to change, open communication and the taking of quick, clear decisions. Everyone knows their part and doesn’t speculate. Employees want security. They need to know what lies ahead. We had some luck too, naturally. Not only were there complementary markets and services, but there was a similar corporate culture. Ed Frederiks and I share a common language – in business matters too. He and other management members who came from ICL demonstrate that the integration is real. Working with clear goals and careful planning were always key to this successful integration.
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