 Brian O’Neill talks to Paul Holland of FleetCor and finds out how a company that is just a little over a decade old has managed to corner the fuel card services market the world over.
The story of FleetCor is a remarkable one, especially in today’s volatile business environment. From a beginning just 11 years ago, the company has grown to become the largest fuel card company in the world. Central to the company’s meteoric growth and business development strategy has been an aggressive acquisition policy that has enabled the company to establish a significant presence throughout the globe. Paul Holland is Executive VP of Corporate Development of FleetCor Europe, a position he has held for almost two years now, and he knows from personal experience that the company’s take-over strategy has been key its success to date. “Before I came here I was managing director of Red Fuel Cards, which was subsequently acquired by FleetCor in August 2009 – I joined the business on the back of that acquisition. In my current role, I’m responsible for developing strategic partnerships, particularly our relationships with major oil companies, which can help us increase value within the fuel card sector,” he explains.
While Holland agrees that the company’s acquisition model is certainly a forceful one, he says that it’s not as simple as just bringing a competitor in under the FleetCor umbrella; it’s not exactly a one size fits all. “The business itself has been fundamentally built on the acquisition of a number of fuel card companies in a number of different territories and a number of different business models which, combined, presents challenges for us. There is a lot of expertise that has been built up through the acquisition of various companies. We have developed a core competence of being able to understand a good fuel card company from a bad fuel card company and being able to recognise where there is potential to make a fuel card company better. Against that back drop, we are certainly interested in more acquisitions – there is no limit on us as to what we can acquire – it really depends on the opportunities that come our way. So, as a global group, it is a strategy that we are all very much focused on.”
In the beginning and for much of the first decade in operation, FleetCor was privately owned by a group of institutional private equity investors, including Bain Capital, Summit Partners and Advent International. However, last year the company successfully launched its Initial Public Offering (IPO) with analysts predicting earnings of US$1.94 per share in 2011 while revenues are expected to come in at US$473.65m for the full year. While the move to becoming a public company has helped the company on a global scale, Holland says that from an operational point of view, little has changed. “From an operating level, the impact of the IPO on FleetCor Europe and our operating businesses has been minimal,” he says. “The plans we have for growth have been in place for a number of years, and they have been consistent for a number of years. We like to acquire companies and we like to make companies bigger and better and focus on organic growth with the acquisitions that we do make. That’s very much our focus today so there really hasn’t been any major changes made as a result of us becoming a publicly traded company.”
Upward Curve
Despite drastic changes in the global economy since FleetCor came to the UK in 2006, and disastrous environmental fall-outs from oil spills at Shell and BP which have done little to help public perception of oil companies and those associated with them, FleetCor continues to thrive. Even as fleets diminish at logistics, transport and oil companies all over the world, Holland says that the upward curve of the company can be attributed to a number of factors.
“There are many reasons why we have continued to grow – it’s difficult, therefore, to pinpoint any one thing as to why the growth story has continued. However, first and foremost, fuel cards is a highly specialised area and it’s an area where there is potential to create better value – that is better value from a customer’s perspective i.e. a fleet customer – somebody who is actually using a fuel card – and better value from a card issuer perspective, whether that is a major oil company or an independent player,” he says. “I think when you focus on anything there is always the opportunity to improve it and because we operate in such a specialist market, we do have the ability to do that. I think when we look at what fuel means to people, especially in a difficult economic environment, it really boils down to businesses focusing on controlling their costs. When you have fleet operators that need to have much more control of their expenditure, they are looking to get the best value from fuel card operators or fuel card payment mechanisms and we have been able to work that to our advantage. For example, we can demonstrate to our customers and to our customers’ customers, in the incidences where we are running fuel cards on behalf of other companies, that they can get a better control of their expenditure as well as getting better value from their fuel.”
The key, then, is providing value for money and taking a long-term view to developing a customer base and client relationships, especially in light of a straitened market where clients look to curb costs wherever possible. “The market is not getting any easier – it has been a tough two years and I don’t think there are too many people who are suggesting that it’s going to let up over the next year or two,” Holland notes. “I would certainly suggest that when operating in areas that have a high degree of impact on a company’s financial situation, you simply must demonstrate that you are providing value. When that happens, then you will attract new business.”
Holland’s attitude, which obviously mirrors that of FleetCor worldwide, is refreshing in that the company, despite its significant position in the market, still seeks out cost saving opportunities that it then passes on to its client base. That, he says, along with the fact that FleetCor sees fuel cards very much as a stand-alone industry, has helped propel the company to a position of significant advantage in the sector. “People and businesses use fuel cards for different reasons. Similarly, suppliers provide fuel cards for different reasons too – they can provide fuel cards primarily as a loyalty mechanism or they can provide fuel cards purely as a payment method. However, there are those, like FleetCor, that view fuel cards as a business in its own right and as a separate business unit,” he explains. “Our philosophy at FleetCor is very much to look at fuel cards as an individual business and because we do that, we can optimise the product from a marketing perspective to make it as attractive as possible within the market place. Critically, there needs to be an understanding of the economics that are at play so we can maximise revenues too on the back of delivering value. But it is very much a double-edged sword in that when we provide our service to our customers and when we are providing our card products or card programme products to oil companies, we need to have a very clear understanding of their business and what their key drivers are. By keeping that in mind, we come at the fuel card market from a very niche and individual perspective and I think that it’s that perspective which enables us to pull on levers that maybe others do not understand.”
Investment in Technology
One of the factors, on top of the acquisition strategy, that has pushed FleetCor to the top of the pile in the fuel card sector is their dedication and absolute commitment to keeping on top of advancements in technology, while also developing and introducing their own bespoke processes to the market for the benefit of their customers.
“Our company is growing through the acquisition of various businesses and with those acquisitions, we naturally accrue a number of systems. What is very clear is that whilst there are different fuel card models and different factors driving fuel card businesses, there is a significant amount that is very similar.Over the years, however, FleetCor has invested quite significantly in various fuel card technologies which has enabled us to optimise our position in the marketplace – the latest being a fuel card platform called Global Fleet Net (GFN), which has been developed over the last three years and which was released to the market about 18 months ago. In fact, in February of this year, we signed a deal with Shell in conjunction with Logica to provide a platform to Shell’s global fuel card business, which really underpins the investment that we continue to make in technology. Technology is at the very heart of our business after all and when we are dealing with many millions of transactions on a weekly basis, it is critically important that we do so as efficiently and effectively as possible.”
“Also, when one considers the pace at which technology is developing and the increased importance that the internet plays in our lives, there has been a significant increase in the demand for knowledge and for speed of transaction data and management information,” he says. “All of those things very much hinge upon the strength of the core of the fuel card processing platform that you operate on. Over the last three years we have invested a significant amount in GFN and we will invest significantly more in GFN in the years to come. It has been developed specifically to be able to respond to the changing market as we see it for the next ten years or so.”
Ahead of the Game
However, Holland admits that technology is becoming increasingly less of a differentiator because all companies in the sector are expected to provide platforms and services that are of sufficient quality to deal with client requirements. Customers, he says, are becoming more demanding and so it becomes more of a challenge to maintain a position as the head of the industry. One of the reasons that FleetCor has managed to stay ahead in the market, though, is its ability to compare and contrast fuel card businesses through the acquisition strategy on a constant basis. That obviously provides unique insights into the sector that other competitors don’t have access to. “Nobody has a monopoly on ideas and nobody has an absolute bombproof business model that is going to blow everyone else away – it is a continually evolving feast for all players but by being active in acquisitions and by having a significant presence in a number of European and North American markets, we can see what is going on within those markets, which allows us to deploy changes and introduce new developments as we see fit,” says Holland.
FleetCor’s acquisition policy, coupled with a successful IPO launch last year, has delivered results, not only for the company itself, but for a client list that continues to grow substantially year-on-year. And to maintain that level of escalation of its business, Holland says the company is going to stick to what it knows and do what it has always done. “We are always looking at acquisitions,” he says. “We have completed, on average, five or so acquisitions per year for the last ten years and I’m sure there will be some additions to our portfolio which will see the business going from strength to strength in the coming months and years ahead.”
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