Success steers Nexus towards major expansion

NEXUS, the vehicle rental firm, is looking for its next acquisition as it continues its private equity-backed growth strategy.

The Leeds-based company has completed two acquisitions since its buyout two years ago, which was led by industry veteran Neil McCrossan and supported by Isis Equity Partners.

"We are looking at the next acquisition now, which will be a significant one and will more than double the size of the business," Mr McCrossan told the Yorkshire Post.

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The company uses its unique trading system to act as a broker between customers and suppliers and offers its business customers a guarantee that it can provide a car within two hours anywhere in the UK. Nexus is set to turn over 32m this year.

Mr McCrossan added: "It's extremely early days and a deal might not happen, but we are pursuing it. We have a list of targets and we are working our way down that list."

Nexus bought Adapted Vehicle Hire (AVH) for an undisclosed sum in May. The Uxbridge-based company specialises in renting adapted cars and vans to people with disabilities.

"AVH was one of the top targets on the list," said Mr McCrossan. "That's what we are looking for: things that are a bit special, a bit different; things that major rental companies are not going to want to do themselves."

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The company has tripled in size since the buy-in, management buyout in February 2008, said its chief executive. The rental management part of the company still provides the biggest stream of revenue, but its outsourcing and specialist vehicle divisions are now starting to grow.

Nexus signed outsourcing deals to manage the rental businesses of Peugeot and an unnamed large corporate user earlier this year, both of which completed in the same week in May as the AVH acquisition.

"That was a fantastic test for the business with three major strategic events happening and the business kept going," said Mr McCrossan. He added: "We have got that critical mass now and we have a management team that is capable of running a much larger business."

Isis, the majority shareholder, remains "extremely supportive" of the firm's buy and build strategy. "It sees Nexus and AVH with a lot of growth ahead of them," he added.

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The original buyout, which made a millionaire of founder Justin Whitston, took place in February 2008, in the midst of the recession.

"The world was falling on its backside," said Mr McCrossan. "However, the world was even worse in October that year when we did the second acquisition, when we bought the VRM business from FMG Support at Huddersfield.

"The week we were doing the deal was when the banks were threatening to close up their doors, the Government was having to step in and bail out the banks right, left and centre and the world was absolutely falling off a cliff. But in fairness to them, our bank and Isis stuck with us."

Nexus has created 35 jobs in the last two-and-half years, mainly in sales, marketing and finance roles, and continues to look for new people. It employs about 74 in total.

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It operates a small call centre with 17 staff, but most of its transactions – 90 per cent – are handled electronically from the initial customer inquiry to end supply of vehicle.

The software system handles 250,000 transactions a year between its own business and other customers using its system under licence.

Britain is reckoned to have the most sophisticated rental industry in the world, which is worth up to 1.3bn a year and is dominated by the business-to-business market.

A third of rentals come from the leisure market.

Historically, there was huge driver resistance to certain makes and models, but less so these days. "There are no bad cars any more. All are good quality products," said Mr McCrossan.

The most popular rental vehicle is a Vauxhall Astra or Ford Focus.