Avis Buys Zipcar for $500 Million
This morning Avis announced that it will acquire car-sharing leader Zipcar for about $500 million. Avis will pay $12.25 per share of Zipcar stock in cash, or almost 50 percent over Zipcar’s closing price on December 31. The boards of both companies have already approved the transaction and the deal should close by spring of this year. Zipcar shareholders will score after months of flat performance, unless of course they bought at the IPO price of $18 or at the company’s peak share price of $31.50. The company was certainly a disruptor within the car rental business, but since its founding in 2000 Zipcar has had difficulty staying profitable.
The acquisition in part sends a signal that collaborative consumption, or the sharing economy, is here to stay, and that large companies are realizing that their businesses face competition from new models that no one even thought of just a few years ago. So is this really a sign that the sharing of goods and services is ready to scale, or is this just another big company swallowing competition to protect its turf?
Car-sharing has grown to a $400 million dollar business, with Zipcar setting the standard by its service, convenience and positioning of fleets at over 300 university campuses across the U.S. Other services such as Getaround and RelayRides have picked up on this bandwagon by going a step further (liability issues aside) and allowing car owners to rent out their own cars while they are idle at home or the office. Zipcar has claimed the car-sharing market will eventually be worth $10 billion in North America alone; with younger drivers eschewing the rush to get that driver’s license at 16 or 17, let alone preferring to share instead of owning a car, that trend is here to stay.
While the business press led by the Wall Street Journal welcomed the Avis-Zipcar acquisition, not everyone was enthusiastic. Washington Post writer Steven Pearlstein predicts that Zipcar will eventually disappear, that Avis will soon eviscerate its newest subsidiary, and called for the Department of Justice’s antitrust division to step in and halt the deal. But is it really in Avis’ best interest to sabotage a service with devoted customers? Gizmodo’s Peter Ha sees opportunity for Avis; Zipcar could score even more customers who would have access to more cars--including those precious vans coveted in New York for that weekend run to the Red Hook IKEA.
Avis’s executives, platitudes aside, would be wise to leverage the company’s capacity and boost Zipcar’s services. The sharing economy is only going to grow, not wither because some big guys and gals snap up new and innovative companies. Wiping out Zipcar would be a small step back, but consumers accustomed to sharing will find another way to avoid being shackled to auto companies or rental car companies. As Forbes contributor Tim Worstall explained, this deal could build value, not destroy a valued service because of the huge deals Avis gains when purchasing cars; consumer choice in this space could actually increase.
Image credit: Zipcar