Business Traveller: Old Ford drives firm to $35m deal

Phil Lennon, founder and general manager of Apex Car Rentals. Photo / Supplied

Hunch pays off for founder of NZ's largest independently owned car rental company.

In early 1992 electronics engineer Phil Lennon had just taken severance from Telecom and was looking for something to do.

He read there was a shortage of rental cars for overseas visitors and the idea hit him: use the redundancy money to buy a fleet of half a dozen cars - the first a beige 1985 four-door Ford Laser.

"There were a lot of tourists arriving here and they couldn't get rental cars for love nor money, so I thought that was a good business prospect to get into."

He started Apex Car Rentals in Christchurch and this month his hunch paid big dividends. Lennon finalised a deal to sell his business to New Jersey-based rental giant Avis Budget in exchange for about US$29 million ($35.5 million) in cash, plus the book value of Apex's rental fleet and potential earn-out payments based on future financial performance.

Lennon will continue at Apex and said the company would not be changing the way it operated - offering a wide range of vehicles of varying ages and keeping overheads down by mainly not being based within airports where the bigger rental firms are.

Lennon said that in the early days there wasn't a lot of money to spare; what there was was ploughed back into the business, which grew to about 40 cars within three years. Cautiously, Apex also opened up branches in Picton, Wellington, Greymouth and Queenstown.

Then in 1996 the business went online and the dynamic changed. No longer was it confined to advertising to a domestic market and relying on walk-up travellers - it could go directly to them overseas.

"All of a sudden you were able to get in front of your customers," said Lennon.

"At the time they were reserving their cars when they were booking their holidays rather than when they arrived here. It was quite a big benefit for us."

He said the company was probably better known in England than here.

Apex grew to be New Zealand's largest independently owned car rental company with more than 4000 cars throughout New Zealand, including locations serving major airports, and has within the past year expanded into Australia.

The model was simple. Offer modern cars and some higher-mileage vehicles and keep up service levels.

One venture that didn't work was branching into camper vans.

"We experimented with that very early on and learned our lesson," Lennon said.

Campers require high capital costs and more staff time. "It can take two hours as opposed to 10 minutes for a car. It's a different proposition really."

During the past 20 years cheaper air fares have meant more tourists and the type of visitor had changed, he said. More were "free, independent travellers" who booked well before they arrive.

The Christchurch earthquakes affected the business, destroying the company's head office and delaying talks with Avis Budget for several months until the impact on the business became clear.

Lennon said that, apart from the immediate disruption, the earthquakes had helped rental car companies.

With little accommodation in the city, overseas visitors picked up rentals on average for two extra days and travelled out of Christchurch immediately rather than spend time exploring the city on foot.

Merging traffic

Avis Budget Group
*10,000 rental locations in about 175 countries. It has 29,000 staff.

Apex Car Rentals
*New Zealand's largest independently owned car rental company with 4000 cars and 140 staff in NZ and Australia