Zipcar empowers pedestrians. The company rents cars under the Zipcar and Streetcar names by the hour or day, rather than by the week. It offers more than 760,000 members access to more than 10,000 vehicles parked in designated spaces throughout large cities in the US, Canada, and Europe, and among some 100-plus North American universities. Drivers (aka Zipsters) pay a fee to use Zipcar's reservation system; they unlock a vehicle using a keyless-entry Zipcard. Hourly rates cover mileage, fuel, and insurance. Founded in 2000, the company typically targets individuals who are supplementing the use of public transportation through car rentals. Zipcar has agreed to be acquired by Avis Budget Group.
Change in Company Type
Less than two years after its April 2011 IPO, Zipcar agreed to become a subsidiary of Avis Budget Group (ABG), which has offered $12.25 per share in cash (approximately $500 million) for the car-sharing service. The deal is expected to close in the spring. Post acquisition, Zipcar's current management team is expected to continue to run the day-to-day operations of the company.
Zipcar's IPO raised nearly $175 million, which it used to retire debt incurred from past purchases and expand its business. While the car service operates in more than a dozen major metropolitan areas across North America and the UK, Zipcar is looking to extend its reach internationally in both existing and new markets. To that end, in July 2012 Zipcar acquired Denzel Mobility CarSharing, a leading car sharing service in Austria. With a presence in Vienna, Innsbruck, Salzburg, and other cities across Austria, Denzel Mobility serves 10,000 members with nearly its nearly 200 cars. The deal followed Zipcar's purchase of a controlling interest in Barcelona-based Catalunya Carsharing S.A. (aka Avancar) in February. Indeed, the company has identified more than 100 metro areas worldwide and hundreds of universities as car-sharing markets to target. The company's strategy is to maintain and acquire new members who live in large, densely populated areas where it's expensive to own or park a car.
Zipcar, which is banking on the success of its car-sharing concept to keep competitors such as Hertz and Enterprise at bay, hopes to achieve sales of $1 billion by 2018. The firm, which has not yet reached profitability, generated 90% of its revenue from vehicle usage; the balance of its business came from membership fees. The big-city service provider, which supplies its members with a variety of cars from Hondas to Toyotas, has boosted its revenue from $3.7 million in 2005 to $127.5 million in 2009. As Zipcar enters more markets, it's jockeying for position with other car-sharing companies such as Car2Go, which has been busy inking deals with cities for reserved spaces. To Zipcar's benefit, however, it offers its customers more than a handful of car choices while some competitors have only one: Smart's fortwo.
Mergers and Acquisitions
Zipcar gained a firm foothold in Europe through its 2010 purchase of UK's Streetcar. As part of the deal, Streetcar will eventually adopt the Zipcar brand name. Zipcar also plans to leverage Streetcar's investments in technology and branding, as well as exercise its increased bargaining power for insurance rates and access to financing. Also, Streetcar founders and executives Andrew Valentine and Brett Akker joined the Zipcar executive team. The acquisition of Streetcar bolsters Zipcar's previous minority investment in Barcelona's Catalunya Carsharing, known as Avancar, the largest car-sharing company in Spain, in late 2009. Keeping its options open in Spain, Zipcar in early 2011 inked a deal that gives it until the end of the year to boost ownership in Avancar to a majority holding.
Investment firm Revolution (headed by director and AOL co-founder Steve Case) owns 23% of Zipcar. Board member Robert Kagle and his Benchmark Capital Partners hold nearly 13% of the company. – less