AMERICAN CANYON -- A subsidiary of Sweden-based manufacturer Volvo AB acquired a North Bay construction rental equipment company as part of a rapid nationwide expansion.
Volvo Rents on Thursday acquired 47-employee Rental Solutions (888-928-RENT, www.rentalsolutions.com) and its other two stores in Santa Rosa and Cloverdale from co-founder Mark Nichols. He is staying on as general manager of the three locations. All existing employees also are being retained.
Mr. Nichols said the unsolicited offer came at a good time for his company. He co-founded Rental Solutions in 2002 and expanded to Cloverdale in January 2006 and to Santa Rosa three years later after annual sales growth of about a third through 2008.
"In 2009 work stopped and banks stopped lending money, and that made it very difficult for a business to borrow to expand and get working capital," he said. "The last three and a half years have been brutal, but I didn't lose anybody in that time."
The offer from Volvo Rents to have a large, stable source of capital to like competing national equipment rental companies while not disrupting the way he ran the business was attractive, according to Mr. Nichols.
That's something Volvo Rents realized as it started a massive purchasing effort of its equipment dealer franchisees nationwide at the beginning of last year, according to Matt Tavianini, Volvo Rents vice president for sales and marketing.
"We're a global brand that makes decisions locally," he said.
The shift from franchises to company-owned locations allows equipment to be moved between stores as construction activity ebbed and flowed in a given region in a way that was difficult to do between different ownership. Yet the flexibility and rapport the franchisees had built in solving customer problems quickly also was important.
Since the transition started, the company has acquired 21 of its franchisees, including eight so far this year. Three remain and have five stores among them.
Volvo Rents now has 120 stores and was ranked No. 17 out of the top 100 equipment rental companies by Rental Equipment Register based on 2010 revenue. In early 2011, the company had 70 stores.
Out of 49 franchise locations acquired, seven have been in California. The state is an appealing construction equipment rental market because its economy is starting to recover, but contractors are more likely to be needing pieces months at a time instead of for several years as their backlog of jobs starts filling.
"They can bid and win and complete work with rental without tying a lot of capital up and use it in other situations -- like supplies and labor -- they need to get the job done," Mr. Tavianini said.
A particular capital-related challenge Rental Solutions has faced in the past few years are California rules for replacing diesel-burning engines with ever-more-efficient models over the next several years, according to Mr. Nichols. Volvo has been among the heavy-equipment manufacturers pushing to develop engines that meet the highest state emissions standards.
The California Air Resources Board has delayed implementation of the rules because of the sluggish economy and the impact, especially, on smaller contractors.
"Something I paid $15,000 for 10 years ago now costs $28,000, and a lot of the increase was around CARB requirements," Mr. Nichols said.