RERMAG

Be Prepared For Emergency Business

The recent dramatic power outage that blanketed the eastern United States and Canada was a quick reminder of the value of rental in society. Immediately the services of standby power rental specialists such as Caterpillar, Cummins, and Aggreko were in great demand, and helped major utilities and industrial users to get power running. Rental centers throughout the region were besieged by calls from customers trying to power their businesses and homes. Even police, hospitals and other public agencies sought help from the rental industry. Manufacturers of generators, such as Multiquip, made emergency shipments and reported that their phone lines were ringing off the hook.

What may have been more important for generator manufacturers than the immediate one-day windfall was that a disaster of this nature forces all kinds of businesses and agencies to think once again about their ability to function in times of crisis. I can't imagine a business owner in the whole continent not re-visiting this issue in their mind — what would I do in case of a massive power failure? One doesn't usually think about blackouts of this magnitude really happening to them. So an event like this might be quite a boon to generator manufacturers, just as the Y2K scare drove generator sales in 1999.

As for the average rental center, I would strongly recommend that you have emergency planning procedures in place — how to power your own rental locations, and how to go about helping customers in need. And I would think on a broader scale in terms of marketing. While the rental business deals with the everyday needs of a wide variety of customers, it is also very much an emergency business. You should make sure hospitals, highway administrations, police agencies and a whole host of other emergency management agencies know who you are and what you can offer in case of power outages, floods, earthquakes or fires. Important profit opportunities arise in those extraordinary times. That doesn't mean you have to gouge people and take advantage of their misfortune in time of need. You can profit without doing that, and make a contribution to your community at the same time.

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Talking with many industry executives, looking ahead to where the industry is going in the future, one future trend that a lot of people expect is more mergers and consolidation. Not necessarily the kind of roll-up consolidation that occurred in the late 1990s, for a variety of reasons, since clearly conditions in the capital markets don't favor the availability of so much capital.

More likely would be the mergers of already existing major players, many of which are highly leveraged. Capital providers are looking for alternative structures that might make some of those companies more viable.

As anybody in business knows, mergers are not easy. So many issues can get in the way. Major executives of large companies are used to doing things their own way. Many companies that have been reasonably successful got that way because they did some things very well. It's not easy to alter those structures to accommodate business models of others.

A lot of factors contributed to the successful merger of ICM Equipment Co. and Head & Engquist, this month's cover subject. To begin with, they do business in similar ways, both being hybrids of sorts, equipment distributorships with a heavy emphasis on product support, with efficient rent-to-rent capabilities. Both companies had strong aerial work platform and crane divisions; ICM was strong in forklifts, and Head & Engquist in earthmoving.

Perhaps the most important factor was that the CEOs at the top, Gary Bagley of ICM and John Engquist, were already friends before any merger discussion took place. They had done business together, they had discussed and consulted with one another on a variety of issues for years. Since they had similar operating structures, and yet were not direct competitors for the most part and operated in different regions, they frequently discussed business issues and compared notes. They are close in age, and had good personal rapport. And when the merger discussions got serious, they agreed that they would be direct and candid on difficult issues that came up, and not be defensive on a personal level.

All of that is difficult to do with a friend; much more difficult with somebody one lacks that personal rapport with. But it can be achieved and the results can make a company stronger.

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