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BusinessCar Office Blog: 20 February 2009 - Will leasing behemoth suffer growing pains?

Date: 20 February 2009   |   Author: Tom Webster

The BusinessCar (home) office

After huge levels of speculation and uncertainty, Lloyds TSB Autolease and Lex have announced they are to join forces to become the first leasing giant.

The first steps were taken when Lloyds TSB announced that Lex boss Jon Walden would be leaving at the end of March. Nigel Stead takes on his role, and faces the task of running the two biggest leasing companies in the industry at the same time.

The boss of Lloyds Banking Group Asset Finance David Oldfield has confirmed senior figures in the group are looking at how to bring the two companies together to create a "strong and innovative market leader", and we know that a Llex TSB will have a major impact on the leasing sector, as the resulting fleet would total a mammoth 403,294 vehicles - 273,503 from Lex and 129,791 from Lloyds.

The first organisations likely to sit up and take notice are the other leasing firms, although they have declined to comment on the matter. Conversations with insiders at leading firms, however, have indicated that rivals may welcome the move, rather than be intimidated by the partnership.

The implication was that a company of such size would be at a disadvantage compared to other, more flexible firms. Trying to change even a relatively simple policy at such a super-firm could be akin to attempting a handbrake turn in a cruise-liner.

But such issues come after the logistical nightmare of aligning all the admin systems. Both sides have been at the top for a reason, so it is fair to assume both will want to continue in the way that got them there.

It's difficult to see, too, how customer services will be left unaffected by such a major operation. Of course, there is no way of saying this will happen, largely because neither side was willing to comment further, but Nigel Stead has a potentially tricky task of ensuring customers don't notice any transition.

Assuming the merger is successful, the next concern for the customer is the matter of choice. Instead of having the option of two large competing firms, there would now be the one. Were the financial climate more favourable, then another hurdle could also present itself in the form of the Office of Fair Trading and then the Competition Commission. Any merger that creates a company that then has a 25% of market share or a turnover in excess of £70m can be investigated in the interests of preventing a monopolisation.

There are a number of reasons why a merger might not be investigated, though, including the secretary of state for business, Peter Mandelson, intervening. This happened with the merger that kicked all this off - that between parent companies Lloyds TSB and HBOS. He may have decided that banking and motoring are in enough trouble already without more obstacles placed in their way. Whether that decision would be in the best interests of all concerned remains to be seen.