More than €1.3 billion: that's how much ALD Automotive's Initial Public Offering (IPO) netted last June. ALD's parent company Société Générale rightly claimed a success, but it is not the only one to benefit. Entering the stock market is good for ALD itself, for its customers – and for the Fleet industry as a whole. The billion-euro question now is: Who will be next? LeasePlan?
ALD is not the first fleet supplier to be listed on the stock exchange – earlier examples include Europcar and Sixt in Europe, and Orix in Asia. But it is the first from the small club of large, global players that includes captive companies like Alphabet (BMW) and Volkswagen Financial Services, and non-captives like Arval, LeasePlan and Athlon. And seeing that the IPO was such a success, it seems likely that it won't be the last.
So, in which ways was the IPO a success? Firstly, for the reasons as advertised. The stated aims of taking ALD to the stock market were to access new funding for ALD's future development and to create visibility for the company.
With a price set at €14.3 per share and a total of 92.9 million shares offered, the IPO raised €1.33 billion in capital. This money goes to Société Générale, which may choose to invest part or all of it in the future development of ALD.
In the fast-moving mobility space, visibility is an essential quality. By going public, ALD comes under the scrutiny of investors and has to conform to accepted standards of transparency. This will make it into a known quantity on the market, a standard point of reference in mobility.
But, as a secondary consequence, the IPO's success also makes it easier for ALD itself to raise the funds for its future development, either by issuing obligations or by appealing directly to the market for fresh capital of its own. Both via the capital raised by this IPO and by making future funding easier, ALD now has the means to ensure its rapid development, either organically or by acquisitions (or both).
Less explicitly mentioned – both before and after the IPO – were the benefits for Société Générale itself. It is no secret that SG needed fresh capital to achieve the positive results it desired. But the IPO also was a test case: checking up to see what its mobility subsidiary is worth.
Société Générale was both prudent and clever to initially put up only 20% of ALD on the market (the additional volume was generated by exercising the over-allotment option). A larger share could have depressed the price; but the volume was still large enough to generate a sufficient return.
That careful compromise has had beneficial effects on the overall valuation of ALD. With 23% of the 404 million shares floated on the stock exchange at €1.33 billion, the total price tag for ALD Automotive can be extrapolated at €5.78 billion. That's interesting to know, should SG decide, at some moment in the near future, to put ALD – or a significant chunk of it – up for sale.
The flipside of the funds raised for SG's gain is that banks, pension funds and other institutional investors together now own more than one-fifth of ALD, a company operating in a specialised environment. A casual observer may fear this could lead to a loss of focus on ALD's core values and core business. Rather, the reverse will happen.
Not only is an increase in funding likely to accelerate the development of future products and services, the transparency required of publicly-listed companies can only have positive effects on efficiency and productivity. Those two effects, reinforcing each other, ultimately are good news for ALD customers, who can look forward to more and better services in the field of fleet and mobility management.
Challenger to pioneer
Just 15 years ago, ALD Automotive had the status of 'challenger' in the highly competitive fleet and lease industry. Only in the last decade did it achieve leadership on a par with other, longer established multinational fleet suppliers. By floating (part of) ALD on the stock exchange, Société Générale took a calculated risk. That risk has paid off, and is likely to further enhance the global profile of ALD.
By establishing that it is possible to raise substantial amounts of money on the stock exchange while maintaining a strong overall value, the company is blazing a trail that others are likely to follow. Accessing this dynamic source of funding will unleash a mighty force of creative transformation, enabling ALD – and those who follow it – to become giants of the diversified space that mobility will occupy in the future.
Mobility is no longer about moving metal from A to B; it is about combining the different philosophies of short-term and long-term rental; integrating sharing concepts offered by Uber and others; taking on board the exciting mobility opportunities pursued by the Amazons of this world; and much more. In short, mobility is exciting, even sexy.
That, fundamentally, may be why now is an excellent time for the giants of the fleet industry to go public – because investors are eager to participate in building this brave new mobility world of tomorrow.
And if this and future IPOs generate the funding and the visibility for these companies to grow to the next level of innovative services and products, their clients can only benefit.