Last month, Andy Taylor, executive chairman of Enterprise Holdings, published a thoughtful piece in the Harvard Business Review on lessons learned when he acquired National and Alamo in 2007 and the deal's implications for his company's ongoing globalization strategy.
At the time, the 50-year-old company, already the world's largest car rental brand, had grown organically, building corporate-owned, off-airport sites to serve customers whose cars were being repaired. It had only been in airports for about five years and was struggling to get good counter and lot locations.
When Taylor read that Vanguard, then owner of National and Alamo, was planning to merge with Dollar Thrifty Automotive Group, he thought the resulting company would make his airport strategy all the more difficult. On the other hand, there were many advantages if Enterprise acquired Vanguard, which had long-established airport locations and little market overlap; Alamo attracted price-sensitive consumers, and National focused on premium business travelers.
But there were also few overlaps in strategy and culture. Enterprise was essentially a network of small neighborhood branches; Vanguard airport locations were much larger. While Enterprise focused on customer retention and "promote from within" policies as the keys to success, Vanguard was consumed with operational efficiency.
Enterprise is privately owned and had about $9 billion in revenue at the time. It could simply write a $3 billion check for Vanguard, without jeopardizing the viability of the original business.
Still, what might have been an easy calculus for many large corporations became a source of great internal debate. Large acquisitions hadn't been in Enterprise's playbook, and while the outside directors were in favor of purchasing Vanguard, it took a while to convince other directors and company executives that there could be opportunity in altering a strategy that had been extraordinarily successful.
The skeptics were eventually won over, in part because without the short-term financial pressures that public companies often feel, the merger could be approached with the philosophy that it was more important to do it right than do it quickly. Enterprise took pains to make sure that Vantage employees didn't feel conquered. They were respectful of the acquired brands' ways of operating, and they didn't automatically drop their systems and methods in favor of Enterprise's existing infrastructure.
In the end, Taylor wrote, "We learned a lot about ourselves and changed our company in ways that have equipped us for faster growth on a global scale."
Shortly after the article appeared, I had the opportunity to explore that acquisition's lasting impact, particularly as it relates to globalization, with Ron Cerko, vice president of travel industry relations for Enterprise Holdings. He outlined an approach that is decidedly contrarian to corporate trends but consistent with the vision Taylor outlined in the article.
When it purchased Vanguard, Enterprise hadn't acquired permanent rights to the Alamo and National brands in Europe, the Mideast and Africa, and their arrangements with the companies that own the brands there expired last summer. Rather than renew the agreements, the company set a course to establish Enterprise in Europe, where it isn't well known.
Surprisingly, the world's largest rental car company had not, until recently, begun executing a plan for global expansion. It started about a year-and-a-half ago, acquiring two smaller European companies, France's Citer (rebranded Citer/National) and Spain's Atesa. It also began to franchise the Enterprise brand in other regions.
It opened the first, in Portugal, in May and has since added locations in Italy, Austria and Slovakia, with 17 other countries in the works; by next spring, it hopes to have 90% of the European market covered.
To serve U.S. corporate travelers, Enterprise created the "Drive Alliance." Companies with corporate agreements can shop any Enterprise Holdings brand code and get the negotiated rate.
The strategy of franchising rather than acquiring European brands appears to be driven in part by lessons learned during the Vanguard acquisition. Cerko suggested that Enterprise recognizes that corporate integration, difficult enough among domestic companies, is exponentially complicated when factoring in inter-regional cultural differences.
Enterprise has found much success going its own way at its own pace and remaining true to its American-grown corporate values. It will be fascinating to see if that approach will hold up in a hyper-competitive global marketplace.
Email Arnie Weissmann at [email protected] and follow him on Twitter.
Correction: Vanguard is the former owner of Alamo and National. A previous version had the wrong name for the former parent company.