Season 2 Ep 1 – United Rentals: Mergers, Markets, and Innovation
Summary
In this episode of ‘Leading the Charge,’ host Kevin and guest Tim Doling discuss the significant acquisition of H&E Rentals by United Rentals. The conversation delves into the scale and impact of this $4.8 billion merger, which expands United Rentals’ fleet and U.S. presence. Industry expert Jeff Eisenberg from Claremont Consulting joins to provide insights on the implications of the acquisition, including increased market share and operational efficiencies. The trio also explores the financial and operational benefits of integrating battery energy storage systems into power solutions, emphasizing the importance of efficiency and cost savings in the current economic landscape.
Takeaways
- The rental industry remains fragmented, with opportunity for both large corporations and independent rental stores, despite recent consolidation
- United Rentals has a strong track record of integrating acquired companies
- Merger reflects United Rentals’ strategic growth plan and dedication to delivering superior service to customers
- United Rentals is transparent about the financial details of its acquisitions, providing information on the multiples paid and expected synergies, which helps justify the deals to investors
Guest
Jeff Eisenberg
Consultant / Principal, Claremont Consulting
https://www.linkedin.com/in/jeff-eisenberg-mba
Links
United Rentals
https://www.unitedrentals.com
https://investors.unitedrentals.com/press-releases/press-releases-details/2025/United-Rentals-to-Acquire-HE-Equipment-Services-Inc/default.aspx
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Speakers
Disclaimer
Any statements or views expressed by the hosts or guests on Leading the Charge are entirely their own and do not necessarily reflect the opinions or positions of POWR2, their partners or affiliates.
Transcript
S2 Episode 1
Kevin Sturmer 0:00
Coming up on Leading the Charge.
Jeff Eisenberg 0:02
Understand that United Rentals has acquired – last time I did a count – it was over 275 rental companies. And in some years, in the early years, they were buying several rental companies each month. So nobody in the rental industry is as good at acquiring and integrating, getting the software and the systems to talk to each other, getting the controls right. Takes a lot of controls to manage a rental business that’s got over 1700 depots.
Kevin Sturmer 0:34
This is Leading the Charge, where we talk innovation and insights in the industry of sustainable energy. Leading the Charge is brought to you by POWR2, a global provider of energy storage solutions. Let’s simplify sustainability and now from the POWR2 studio, and broadcasting everywhere from leadingthecharge.io, here are your hosts, Tim Doling and Kevin Sturmer.
Welcome to Season Two of Leading the Charge, where we talk battery, energy, storage, insights, innovation and the industry of sustainable energy. My name is Kevin, and I work in the marketing department of a company called POWR2, and with us is the incredible Tim Doling. He is not only a co founder of POWR2, he is the Vice President of Global Markets. Tim, how are you doing?
Tim Doling 1:22
Doing well, Kevin, welcome to 2025 and we’re pleased to keep going with Leading the Charge.
Kevin Sturmer 1:26
Yeah, excited for that and a significant conversation today. United Rentals has acquired H&E rentals. Now a For those not familiar, H&E was ranked top five here in the US last year in terms of rental companies, and this is a rather significant announcement that’s been made. It was a $4.8 billion merger. It expands the United Rentals fleet by about 64,000 units, the footprint of the branches across the US about 30 states, including two new facilities that have just opened up recently, so a significant shift, let’s say, in the rental industry. Fortunately, we have not only Tim, who has quite a career in the rental industry, he’s seen mergers like this before. We also have Jeff Eisenberg from Claremont Consulting with us, who spent most of his career as well in the rental industry with a specific focus on energy as well. Hi, Jeff. How are you doing?
Jeff Eisenberg 2:24
Good. Thanks. Thanks for having me.
Kevin Sturmer 2:26
It is great to have you here. I really want to get to Tim first. Tim had some initial reactions to this acquisition. So Tim, what were your thoughts when you heard about this?
Tim Doling 2:37
Yeah, it’s interesting, Kevin. We like to watch the industry, and like to see the movements with mergers and acquisitions. And this one, I think, is significant, being that it’s really united rentals, first major acquisition Since 2022 when they took over Ahern. So Ahern was not quite the same scale. I think they had about 106 rental branches, whereas this one coming in now is going to be 160 rental branches. So it’s a lot larger. But as United Rentals grows, the scale is just incredible. So I’ll let Jeff speak to it, but we can look back to maybe 2011 where the RSC merger happened, and that was when, you know, the number one, United Rentals took over, the number two RSC Rentals in this space, and United Rentals at the time, had 540 branches. RSC had 450 branches. So it’s like doubling the company in a very short space of time. So now United Rentals is 1500 branches, and they’re taking on a company that has 160 branches. The scale is just so much different, but it’s still, nevertheless, it’s just a huge movement in our industry, and I’m glad that Jeff’s on board here today, because he’s had so much more experience in the M&A space. So love to hear his perspective on it as well.
Jeff Eisenberg 2:43
Thanks for having me. I think it’s a it’s it’s interesting that United Rentals is doing this, but it is part of their core business. It was originally formed as a company to acquire and put together rental companies. One of the founders, Brad Jacobs, United Waste Systems, Inc, which, that’s where he came from. It was a company that put together a lot of things in the waste industry. So it’s a see, it’s consistent with the history grow. The core is one of the things that the United Rentals talks about to their shareholders. It talks and investor meetings, and they’re good at it. So they’ve there’s a critical mass argument in rental. If you get up to a certain size, it’s easier. You’ve got more power to negotiate with suppliers. You have branches everywhere you can move equipment, east, west, north, south, follow the work. So United Rentals is also traded on the stock exchange. Has been since something like a year or so after it formed in the late 90s. So it has access to the capital markets, although Head & Engquist is also traded on the stock exchange. So every time United in good times, buys a good rental company, or even if it’s expensive, United Rentals can make the synergies work. They can make cost savings, but maybe even more importantly, they can make they can make synergies on the revenue side. They can sell things from the catalog to customers that that were former Head & Engquist customers that are now going to buy other things that United has to sell.
Tim Doling 5:25
And I think that’s that’s a really important point, and that’s where I think it really applies to our business here Kevin is because H&E is typically regarded as a general rental store. So they had aerial and they had general tools. United Rentals wants to come in and bring their specialty product offering, whether that be pump power, trench, that type of thing, and offer it to H&E’s general rental customers, and therefore offering a new range of products to an existing customer base. And by doing that, they can grow their overall share. Would you agree with that, Jeff?
Jeff Eisenberg 5:55
Absolutely. And Uunited Rentals, they are effective at doing that. Now, unlike many rental companies, when United acquires another company, they will tell the analysts, they’ll tell the they’ll tell the stock market exactly what they’re doing. They will make a commitment to a specific synergy level, and then they will go back to the stock market and they will answer questions about whether or not they made it. So they are good at doing that. Understand that United Rentals has acquired – last time I did a count – it was over 275 rental companies. And in some years, in the early years, they were buying several rental companies each month. So nobody in the rental industry is as good at acquiring and integrating, getting the software, the systems, to talk to each other, getting the controls right. Takes a lot of controls to manage a rental business that’s got over 1700 depots.
Tim Doling 6:49
Correct. So where, where does that leave the general rental company like the independents, like, is there a pathway forward for them, or is it ultimately going to be managed by the bigger players.
Jeff Eisenberg 7:01
Well, understand that the United Rentals, I think they said that this acquisition takes their market share in the United States or in North America, from something like 15% to something like 17% so still, and number two is kind of, it’s kind of far behind. So it’s still a very fragmented industry. So it’s, it’s never going to be the case that United buys half the industry. It just, I think it just won’t happen. But, and the other thing that happens is that United Rentals and the other acquirers, the other consolidators, when they buy rental companies, sometimes these people, the the entrepreneurs that sell their businesses, wait till the non competes expire, three years, five years, and then they come back. We call them the rental returners, and they successfully start up again, and this time they’ve got more money to do it. So that’s a successful strategy. There are people that have done that two even three cycles of build a rental company, sell to the one of the big ones, come back and and build it again. So United Rentals may continue to acquire companies at this pace for many, many years, but it will never finish. The big question about United Rentals is, when are they going to do something similar in quite this dimension, at quite this speed, outside the United States,
That’s an interesting thought. So they have made some inroads. I’ve seen some acquisitions in Australia within the last year or so. Do you see that continuing? I mean, there’s some big players in Australia, well known names, potential for them, I would think, do you think that’s on the horizon?
Australia calls itself the lucky country. It’s a rich country. Mining Industry helps it a lot. So they’ll, they’ll so the in the equipment rental industry is prosperous, so that’s a natural place for United Rentals to invest. United Rentals also does business in Europe, although in a smaller fashion, but they are still acquiring here too. The top rental companies in Europe, the big three, Loxam, Boels, Kiloutou and Sunbelt are actually less profitable than United Rentals is in the US, so I can see why it’s more tempting to buy a Head & Enquist In the United States, where you’ve got all the synergy and it’s low risk, they’re buying their neighbor, rather than entering into another geography where they can’t necessarily move equipment back and forth.
Tim Doling 9:32
That’s interesting, and that’s something I heard at a recent trade show, is that the rates stateside are just so much higher than what are commanded in Europe. And so why is that? Is it because of market pressures and the competition, or is there something in the US market that means we can command a higher rate?
Jeff Eisenberg 9:48
I think, I think it’s a combination of things. I think in the United States there is a little bit more inflation in construction, construction labor, construction equipment. So that’s that may be part of it. In very concentrated markets like the United Kingdom, very small geography, a lot of people on top of each other. There are a lot it’s very easy to get competitive offers. Lot of rental companies working in the same geography. So So similar situation to France, Germany and the other larger European countries, which are, it’s is a lot of competition. There are 100 rental companies plus that you can rent a piece of construction equipment from just in London
Tim Doling 9:54
Interesting. So I guess in the US, we have a very large land mass. We largely have one language. Product is shipping east to west coast all the time. Does the same happen in Europe between the different countries in the European Union, or…
Jeff Eisenberg 10:44
it does, although most of the rental companies in there’s not so much, there’s not so many dominant rental companies in Europe that have a full catalog in each country. So Sunbelt, very concentrated on the United Kingdom, with some presence elsewhere. Loxam, full catalog in some countries, in Scandinavia and France, partial catalog in the United Kingdom and partial catalog in some in Italy, for example. So it doesn’t move. The equipment doesn’t seem to move as quickly, although it can, because CE spec equipment will move in and out of different European countries. But I think in the United States, it may move faster, just as I think labor moves faster from state to state.
Tim Doling 11:27
Absolutely does. Yep, yeah, we see people moving around. They often stay within the industry, but they move between locations or between companies a lot. So that’s interesting. Kevin…
Kevin Sturmer 11:37
Matthew Flannery, the CEO of United Rentals, came out with some statements in this press release as well, and it kind of gets what you were saying before about not only do they want to serve their end users, their customers, but they also want to serve their shareholders. The quote is this, that “We will use our well honed integration playbook as we prepare the acquired branches to take full advantage of our systems and operational capabilities and gain from our employee and customer centric culture. I look forward to welcoming our new team members upon the closing of the acquisition.” When you hear that quote, what are you taking away from that?
Jeff Eisenberg 12:15
I think United Rentals can say that more credibly than most of the rental companies on the planet, they’ve got good systems. They have integrated 200 plus rental companies. They do it correctly. They put their stamp on everything. They do have excellent systems. I remember 10 years ago, one of the questions you would ask a good rental company, you see how good its systems were are. Do you have the bar code or a QR code on every piece of equipment. Do you scan it when it goes on the truck? Scan it when it comes off, scan it when you pick up, and then scan it in and out of the workshop. United Rentals did that before any other big rental company, as far as I understand and they they’ve stayed ahead. They’ve got excellent apps that the sales people use to quote prices, and they’ve got great pipeline, got a great IT system, I guess you need that. If you’ve got 1000s and 1000s of branches and 1000s of 1000s of people in the sales force.
Kevin Sturmer 12:20
they’ve got the infrastructure and the process in place to fold a company like H&E in and make it as seamless as possible for everyone involved. Which is also speaks to the conversations we’re actually hearing around the industry of making things more efficient and also getting to saving money. And that’s a return. I mean, obviously those are the focuses of any business, but it’s a return from, you know, maybe last year, a lot of the conversations were meeting our sustainability goals. Do you see similar things in the conversations you’re hearing?
Jeff Eisenberg 13:46
Absolutely, absolutely. It’s, I think the United motivation for this is, is, is more financial than anything else, because it, it, it. The big question that I get asked, usually on when united or anybody else, acquires something big is, did they pay a big multiple? Was it expensive? Does it make sense? And in this case, well, and United is pretty good at disclosing information. They will say, here’s what the EBITDA of the target company was, here’s the multiple we paid. Here are the synergies. So here’s what we’re going to save. It’s much more open than almost every other acquisition, because, I guess, United wants to show their investors that they’re doing this transparently, and it’s repetitive, while if a private equity buys a rental company, the tendency is to hide everything they can, because then it’ll make it in theory. It’ll make it easier to negotiate the next acquisition. So there’s that’s and there’s been a trend in that over the last 510, years that the even almost every acquisition, has much more hidden in terms of numbers than they used to in the past. So
Tim Doling 14:56
They’ve been doing this for so long, Jeff that you have to believe. That it’s been successful and they have been able to return that actual rate of return to the shareholders that they’ve promised. You’ve opined in the past on what they’ve paid for some companies. In fact, I think you said once famously that they overpaid for something. How did that pan out in the long term?
Jeff Eisenberg 15:16
No, I don’t think I’ve ever said specifically that united as rentals is overpaid for anything. What I did say is, if it keeps growing at this rate, it was a good deal. So that’s a it’s a little bit different. Now, because they’re buying a company in North America. This is a bet on the United States economy. So provided the entire the equipment rental industry, plus the industries that it serves, industry, construction, so many other things, events. A lot of these have some optimism and to buy a rental company for several times its annual revenue, or almost seven times EBITDA in this case, you to make that make sense, you’ve got to depend on some some some growth. But the United Rentals continues to grow year on year. The stock market seems to reward it. It’s the most valuable rental company in the history of rental companies. In fact, the United I think the market, the market capitalization did pass $60 billion at one time. And remember, the entire rental industry in Europe is less than that. And united, arguably has used to be 15 now something like 17% of the market. So the numbers are extraordinary, and the optimism keeps the keeps the share price, making, making united the continue to look like a good investment with room to grow
Tim Doling 16:46
Absolutely and that they’re obviously very successful with, with their reported earnings incredible in the last year. So congratulations to them and what they’re doing there with their leadership.
Jeff Eisenberg 16:58
Now this acquisition aside, the United rentals has been paying down some debt over the last years, despite the fact that it’s been investing in incredible amounts of equipment and repurchasing its own shares. So it’s become quite a quite a cash generation machine. Now, if you go back to the original United Rentals, I think the original business plan was they bought seven rental companies and put them together, and then they bought something like 100 in the in the year or two after that. So the idea that the United is is would get up to the size where it’s going to be doing a billion dollars of revenue every month is compared to some of the lesser developed or the Europeans. This is, these are, these are some big, big numbers, but at 17% market share, there’s still room to go, and there’s a lot of the rest of the world.
Kevin Sturmer 17:51
Yep, yep, yep. So now, as we do with every episode, we end by answering some questions, and if you’d like to submit a question, you can always send us an email at [email protected] that’s P, O, W, R, the number two, dot com. As we’ve talked about, there is this refocus into efficiency and saving money when it can, especially when it comes to temporary power battery, energy storage. So Tim, question for you, actually, I’m gonna open up to Jeff as well, if you have a thing. Top, top ways someone can reduce money by integrating a battery, energy storage system into their power solution.
Tim Doling 18:29
Yeah, that’s good question and one that we get a lot. As you mentioned, the shift has been a little bit from sustainability to financial. As Jeff mentioned earlier, a lot of the drivers is financial. So what we see when people are running purely on a diesel generator on a job site, they’ll be not running efficiently. That is to say, the generator is not running its most efficient load profile. And by adding energy storage, you are just using the energy that is required on the site that is stored in the battery. Then you turn the generator on just to recharge the battery. That means your generator runtime is a lot less, so your service intervals are a lot longer. You’re burning a lot less fuel. So right there, you have savings on, obviously fuel servicing and shift rental when the rental companies charge you for more than a single shift rental rate. So there’s a lot of financial benefits. You obviously have to factor in the asset cost of the battery, but when you do the figures, the overall savings are there, and the total cost of ownership of your generator is going to be less because you’re doing less servicing and maintenance and engine repairs and that type of thing. So Jeff, you’ve had a lot of experience in this. You can add to that.
Jeff Eisenberg 19:33
Well, at different markets around the world, economics are a little different. For very large market in the Middle East, Saudi Arabia, just had a big increase in its diesel fuel price for construction sites and everybody else. So every time the diesel price goes up, then having the right size of generator working right in its sweet spot, the efficiency goes goes up. The equivalent is driving 100 mile an hour capacity car through a very crowded. At two miles an hour all day long. The the diesel engine just does not like working under under too light load. And as the emission control systems on these diesel engines, stage five, tier four final in the US as they they really require the diesel engine to be working in its sweet spot with some load on it. So if it’s too lightly loaded, makes all kinds of maintenance problems, fire hazards. There’s all kinds of inefficiencies. If you can have your generator running in exactly its most efficient sweet spot, charging the generator, but half the time, or third of the time, the savings are immense.
Tim Doling 20:41
That’s fantastic. Jeff, can I just circle back to that fuel cost question in the Middle East? Because something we’ve always battled with a little bit is the incredibly low fuel costs in that region. So what’s happening there to increase the diesel fuel costs?
Jeff Eisenberg 20:55
Well, the one of the well, Saudi Arabia was always famous for it, because it’s a big producer and as a benefit to its citizens, it gave out essentially, it was originally at cost and then sometimes subsidized diesel fuel. But doing that has some perverse incentives. Just like Saudi Arabia used to have very cheap electricity because of the energy. You’re encouraging inefficiency the Saudi all over the Middle East, where the electricity was too cheap. If somebody went on holiday for two weeks, they’d leave the air conditioner running at a very high rate so it’s nice and cool when you come back. Now with more expensive energy, you get an app, control it remotely, do it more efficiently. You the efficiency is much, much more important. I live in I live in the United Kingdom, which is a country with very expensive fuel I better believe I bought a vehicle that has very good fuel economy exactly for that. So the economics of fuel are going to be one of the things that continue to drive certain applications on construction sites. One of the best ones is a tower crane. Most of the time it’s working almost no load. Occasionally, as a big grunt as the tower crane lifts something up, is one instant where you need a generator this big. The rest of the time the generator you need is this big. So rather than having this one run inefficiently, the answer is, get a smaller one perfectly in its sweet spot of efficiency. Charging the battery, it’s it’s one of the most obvious quick wins in the in the in the battery system. Even if the battery is expensive, the fuel savings and the fuel and the efficiency of the operation is absolutely massive. Absolutely
Tim Doling 22:43
Couldn’t agree more. Thank you, Jeff. Really appreciate your time today.
Kevin Sturmer 22:45
Yes, thank you so much. And whatever platform you’re on, hit the like button, hit the subscribe button, leave a review, do all of those good things, and if you want to learn more, we’ll have links to everything in the show notes, links where you can find Jeff on LinkedIn, or you can just visit leadingthecharge.io. Our legal team wants me to say that any statements or views expressed by the hosts or guests on Leading the Charge are entirely their own and do not necessarily reflect the opinions or positions of POWR2 their partners or affiliates. And once again, Jeff, thank you so much. Appreciate you taking the time to talk with us today.
Jeff Eisenberg 23:19
My pleasure. Thanks for having us.
Tim Doling 23:21
Thank you
Kevin Sturmer 23:21
Wonderful. And we know that your time is valuable as well, and we appreciate you spending even just a little bit of that time with us. So let’s simplify sustainability and keep Leading the Charge toward a world powered by sustainable energy. See you next time.