Lloyds TSB's proposed merger with HBOS would create the country's biggest fleet management player and rationalisation is inevitable, but there should still be plenty of competition, says Nic Paton
One of the less remarked-upon aspects of the agreed £12bn merger of Lloyds TSB and Halifax Bank of Scotland (HBOS), has been its ramifications for the fleet management industry. The deal will bring together the two biggest players in fleet management - Lloyds TSB Autolease and Halifax's Lex Vehicle Leasing. This could have huge implications for fleet managers, HR departments and employee benefits specialists.
When the deal goes through, the two organisations will have a combined fleet of more than 380,000 vehicles, dwarfing the the next biggest player, Leaseplan, which has approximately 120,000 vehicles. It remains to be seen what this will mean for employers and how it will affect what are two similar businesses that will end up being owned by one parent company.
Even Nigel Stead, managing director of Lloyds TSB Autolease, conceded in an interview with fleet industry title Fleet News last month: "We come a long way down the list [of things to be clarified]. This may not be wrapped up until the turn of next year."
Lex is equally reluctant to be drawn on what the future holds. James Lambert, head of PR at Lex, says: "It is a sensitive issue and is not something we would want to comment on until we hear from HBOS what its plans are. It is early days."
Healthy competition? Whatever happens, John Lewis, director general of the British Vehicle Rental and Leasing Association (BVRLA), believes that, for the wider industry, it is very much a case of business as usual. "Our industry is used to dealing with consolidation," he says. "There has always been a need for leasing companies of all sizes in our industry."
Even if the creation of a super-sized single fleet provider goes ahead, there will still be considerable competition within the sector, says independent fleet management consultant Colin Tourick. "In the US, the market went through massive consolidation back in the 1980s and there are now just half a dozen big players to choose from," he says. "So if this sort of deal was happening there, I think people would be saying 'Oh my God' but here, at least for now, there is still lots of choice.
"There is no question that the bigger [firms] are, the more they can extract by discount. But these two are already the largest and second largest in the country, so how much more of a discount can there be? What you will also find is smaller players seeing it as an opportunity. They will be able to position themselves, to make it a unique selling point, that they are not a big player and so will be able to offer a more individual service."
In the longer term, the question is whether Lloyds Halifax (the current proposed post-merger name for the organisation) will want to maintain two separate fleet management businesses, says David Rawlings, managing director of consultancy Business Car Finance.
Lloyds TSB has indicated it expects to make annual savings of more than £1bn from the takeover and, although the finger has not explicitly been pointed at fleet management, it is unlikely that doubling up on such a scale will be tolerated for long.
"I cannot see any bank, long term, saying it will be happy to have identical systems running side by side," says Rawlings. "It may not be quick, but even if it does not merge them, I am sure something will happen. It may be that it will look to sell off bits of them."
Until more details of the deal become known, however, fleet managers face more immediate challenges in dealing with issues such as the slump in new registrations, and the wider impact of the credit crunch and economic downturn.
"Generally, it is very much a buyer's market out there at the moment and every HR director responsible for a car fleet should already be thinking about their options," says Tourick. "Fleets are an expensive item on [an organisation's] profit and loss account, so it is something that will have to be looked at, but then it is always something that has to be looked at." EB If you read nothing else, read this...
n The implications of the Lloyds TSB/HBOS merger for the two organisations' fleet management arms are unclear.
n Lloyds TSB Autolease and Halifax-owned Lex Vehicle Leasing are currently the two biggest players in the fleet management market.
n The banks' merger may lead to greater economies of scale on fleet, but there could also be opportunities for smaller players to position themselves as offering a more personalised and bespoke fleet service.
n The chances of both Lex and Lloyds TSB Autolease continuing with the business unchanged are remote, with a merger or sale of some assets being probable outcomes.
n At present, many in the fleet industry believe it will be business as normal, because they are used to acquisitions and consolidation taking place among providers.
