Avis Bumps Fists With Zipcar On $500 Million Acquisition
Avis Budget Group is buying Zipcar, the 13-year-old company that controls about three-quarters of the $400 million car-sharing industry in the U.S., for about $500 million, causing some dismay among urban hipsters, environmentalists and proponents of “dis-ownership” across the country. But others see the corporate resources of Avis as a good thing, able to propel the borrow-rather-than-buy movement from the economic back roads to the Interstate.
AOL co-founder Steve Case, whose Revolution Living LLC is Zipcar’s largest shareholder, says “this merger signals that the sharing economy has come of age,” Diane Brady reports in Bloomberg Businessweek. Avis’ offer of $12.25 per share represents “a premium of 49% to Zipcar's Monday close,” report Reuters’ Sagarika Jaisinghani and Tej Sapru. Analysts tell them that a higher counter-bid is unlikely.
"We see car sharing as highly complementary to traditional car rental, with rapid growth potential and representing a scalable opportunity for us as a combined company,” says Avis Budget Group CEO Ronald L. Nelson.
An Avis spokesman tells Ad Age’s Maureen Morrison that it “plans on keeping the Zipcar moniker,” saying, "we consider Zipcar to be a very strong brand, the worldwide leader in its segment." Zipcar is in the midst of a review for an ad agency that was stalled by the departure of CMO Rob Weisberg in August.
Boston Business Journal’s Joe Halpern has put together an informative slideshow of Zipcar “from founding to acquisition.”
“There is no denying it: We live in a Zipcar world now,” writes columnist Dennis K. Berman in “The Game” blog in the Wall Street Journal, “one in which we think little of ‘sharing’ a car for a few hours, renting a Parisian flat via home-rental site Airbnb, or sharing sports gear and even pets. This is what Zipcar Chief Executive Scott Griffith meant in November when he called Zipcar a ‘business model company.’”
But as much as “the full liberation and efficiencies of this ‘hyper-rental’ economy have really just begun,” so, too, is that business model in its incipient stage. To wit, “Zipcar was a prodigious money-loser over the years,” suffering from limitations of capital, efficient scale and marketing, Berman points out. It needs to acquire more customers more efficiently.
“Already, naysayers are predicting that Avis will ‘ruin’ Zipcar,” writes Brandchannel’s Dale Buss, citing a “Wonkblog” post by the Washington Post’s Steven Pearlstein, who claims that it’s always bad news for consumers when companies with old-school business models acquire market disrupters such as Zipcar.
“The real issue in these deals is culture,” says Pearlstein. “Zipcar has a way of doing things that is particularly appealing to the young, hip urbanites who walk, bike and use public transportation most of the time and don’t own a car.”
Indeed, the New York Times’ Andrew Martin’s story on the transaction ledes with a San Francisco couple –- ostensibly representing “Zipsters” everywhere -- who gave up their automobile last year and have “few regrets” despite the occasional difficulty of securing a Zipcar on weekends. “It’s a lot easier to rent than to own in a city these days, and Zipcar is an easy way to do it,” says Lane Becker. “Please don’t let them screw it up.”
“Them,” of course, is Avis, which presumably has a way of doing things that was very appealing in a world where female desk clerks wore stewardess-like caps, the Eero Saarinen-designed TWA terminal at JFK was as functional as TWA, and “We Try Harder” was a daring departure from traditional chest-thumping ad copy. That would be before hippies, however, no less hipsters.
But, says Avis’ Nelson, “We are committed to retaining the elements of the Zipcar brand and culture that have allowed Zipcar to achieve such rapid growth and success.”
Avis, which slipped to No. 3 in the $22 billion U.S. car rental industry after Hertz acquired Dollar Thrifty Automotive Group in August, is itself engaged in a revitalization program. It dropped its iconic “We Try Harder” tagline for the “It’s Your Space” earlier this year, a campaign out of Leo Burnett that has seen more jeers than cheers from the ad review punditry.
“‘It's Your Space’ is ambiguous at best, in my mind, and feels generic and uninspired -- something I'd easily forget,” wrote Darren Booth in CNBC’s “Road Warrior” blog. And in reviewing the first three TV spots of the new campaign in August, Ad Rants’ Steve Hall wrote: “Sadly, the ads (well, two out of the three) follow the now standard approach of portraying businessmen (and they are all men in these ads) as buffoons who just can't wait to get down with their wannabe hipster, fist-bumping bad selves.”
The Avis-Zipcar bromance is scheduled to close when spring is in the air.