The Spanish equipment rental industry consists of around two thousand operators with an aggregate turnover of 1.7 billion euros. If GAM’s expectations are fulfilled, in a few years the number of competitors will drop. The corporation, controlled by Nmás1, Cajastur and the management team, was founded in 2003 by the integration of five major equipment rental operators.
This consolidation effort was just the peak of the iceberg of GAM’s strategy, since GAM “is seeking to concentrate the industry”, as Mr. Pedro Luis Fernández, share holder and C.E.O. pointed out. A few months after its foundation, GAM bought five companies and opened twelve new offices. Due to this growth, GAM registered a turnover of almost 90 million Euros in 2004, an increase of 28% and a net profit of 9.9 million Euros. According to Mr Fernández “GAM expects to accelerate this development to achieve a sales volume of 108 million Euros. Not counting new acquisitions, since we expect to close two more acquisitions in March and April”.
If GAM’s ambitious expectations are fulfilled, GAM will register a turnover of more than 250 million Euros in the 2007-2008 period, thus becoming a clear industry leader with a market share of 20%. This sector development was a collateral effect of the construction boom of the eighties. The current market share of GAM is 10%. Equipment rental companies have not gone throw the processes of consolidation experienced in all construction-related industries. “We will analyse all purchase opportunities. The larger the company is, the more we like it”, declares Mr. Fernández.
According to Mr Fernández, “A merger with Euroloc, its main competitor in Spain, would make sense and there are some synergies, but it’s too soon”. So far, GAM has focused on purchasing profitable companies with a sales volume of more than 8 million Euros. GAM has an equity capital of 50 million Euros and a fleet of over 17.000 machines and seeks to avoid depending too much on the industry’s development, therefore GAM tries to get more market with new lines of business such as trade fairs and events development. A 70% of the construction and public works industry. According to Mr. Fernández “So far, we have been too market dependent, and we have to avoid risks”.
GAM is contemplating to go public and is specialized in providing all kind of services, a concept known as One-Stop-Shop, services provided all over Spain and is also specialized in managing custom services depending on product and location. The life expectancy of the equipment used is about eight or ten years. However GAM wants to have a fleet with an average life of 5 years. “In order to do that we need to sell the oldest machines” declares Mr Fernández. GAM is currently analysing a joint project with the mining corporation HUNOSA to create a recycling center for discarded equipment, that will be focused, mainly, on exporting. This joint venture will start to function late this year, and the percentage of level of control of each partner will be 50%. |
