Buying a company is a complex business transaction. Acquiring a new business generally requires months of cautious planning and expert negotiation. In order for some acquisitions to be successful, complex agreements must not only be crafted, but they must be approved by governmental agencies and regulatory bodies. If steps are skipped, missed or improperly handled, acquisitions can very easily fall apart.
New Jersey car rental company Avis Budget Group Inc. recently announced that it has come to an agreement with Zipcar Inc. Under the terms of the agreement, Avis will purchase Zipcar for $491 million — or $12.25 a share. The deal should be completed by early 2013. Zipcar rents cars to consumers by the hour. The company currently operates in 20 cities in the U.S. as well as in Europe and Canada. The deal is expected to generate between $50 million and $70 million annually for Avis by the second year after the deal is completed.
This announcement comes months after Avis lost the opportunity to acquire Dollar Thrifty, another car rental company. Instead, as this blog has highlighted in the past, a deal was reached between Avis’ competitor, Hertz Global Holdings Inc., and Dollar Thrifty. This acquisition is expected to help Avis compete with Hertz, which is also building its market share of short-term car rentals.
As the failed deal between Avis and Dollar Thrifty shows, not all acquisitions are successful. In many situations companies must act quickly and efficiently to execute their corporate strategy. With the right legal guidance, decisions can be made in the best interest of the company that help to get the deal completed.
Source: Bloomberg News, “Avis to buy Zipcar for $491 million as N.J. car rental wars heat up,” Jan. 2, 2013