Canadian rental leader takes ambitious stance on growth

Cooper execs say the company’s approach on fleet expansion is “very bullish.” (Photo: Cooper Equipment Rentals)

It’s been quite the journey for Cooper Equipment Rentals. The Canadian company has undertaken an ambitious growth strategy since 2010, which gathered pace in 2013 when private investment firm SeaFort Capital made a majority investment.

It has grown its footprint in Canada from two locations in 2010 to 71 now, through greenfield openings and multiple acquisitions, most recently of Warner Rentals, Scotty’s Rentals and Hub Equipment. At the same time, the Mississauga-based company has ventured into new areas of rental with the launch of divisions for pumps, climate control and power.

Opportunistic approach

It grew its revenues to around €220 million last year, representing year-on-year growth of more than 30%, and is now one of the 20 largest rental businesses in North America.

In Canada, it is behind only United Rentals, Sunbelt and Caterpillar dealer Toromont (which owns the Battlefield Equipment rental business.) “There will be more acquisitions,” says Doug Dougherty, who joined the company in 2010, speaking to IRN in early November, “The kind of companies that we would be interested in acquiring would be single location or multiple location general rental companies, or potentially in the specialty area where we’re currently involved with pump and power, trench safety, work zone safety and climate control.

“We’re opportunistic when it comes to acquisitions. We’re conscious of how an acquisition fits culturally and into our current strategy and footprint. These are the kind of questions that we always want to answer before we get too serious about an acquisition, greenfield or cold start.”

Brian Spilak, who took the role of COO earlier this year after working with Texada Software and Battlefield Equipment, adds, “We’ve done four in the last 18 months, and we’ve got a couple in the pipeline right now. We typically do acquisitions when we’re going into new geographic markets or new product lines and then we pepper in greenfields when we’re tucking in geographic areas that we’re already represented.”

Dougherty observes that the landscape of acquisitions has changed for the company; “Because of our successful track record in integrating the acquisitions that we’ve done over the last 10 years or so, owners reach out to us on a regular basis and express an interest in discussing a potential acquisition. It’s essentially reversed the process, where the flow of deals is coming to us

Brian Spilak, COO, Cooper Equipment Rentals

now.”

Home comforts

Right from the outset of the interview, Dougherty and Spilak make one thing clear; the goal is to be “Canada’s rental company.” Cooper currently operates in six provinces, and it’s this localized approach that both Spilak and Dougherty believe differentiates it from other players.

Of course, there are other opportunities outside of Canada, namely the US. Is the company looking across the border? According to Dougherty, it’s unlikely.

“We’re conscious of how Cooper has built its story around being a Canadian-owned, Canadian-operated company,” Dougherty says.

“We would have to change the story if we were going to focus on building something in the US. Our focus is Canada. We think there’s a lot of opportunity to get it right.”

“Our best estimate of our market share in Canada is around 6% so we feel like there’s a lot of room to grow yet,” Dougherty says, adding that the company believes there are ample opportunities within its existing services.

Spilak adds, “We have a significant trench safety business, a pump and power division, climate control/propane distribution division and fencing divisions.

“These are all divisions that work well in conjunction with our core branches in other markets, because they all work in conjunction with each other. There’s a lot of opportunity that we have on the horizon across the country for sure.”

Meanwhile, Dougherty remains positive on the long-term future for the industry in Canada, backed up by “stronger reasons to rent” in the current climate; “The rental fleet will continue to grow, and I’m not just talking about the Cooper rental fleet. The rental fleet in general will continue to grow as a percentage of the overall fleet in Canada and North America. Rental penetration will continue to increase.”

The natural resources sector is, of course, a major industry in Canada, particularly shale oil. Is that a major market for Cooper?

“It is part of our business,” says Dougherty, “but it’s not a big part. In oil and gas, where we’re most involved is on pipeline construction and maintenance. We have some really good customers in the pipeline industry and we kind of focus on them.

“Oil and gas over the years has been either boom or bust, so it’s a little bit more difficult to predict where you’re going to be with that. Certainly, right now the industry is doing well and that’s driving the general economy and in Alberta and British Columbia, particularly.”

Investment opportunities

In 2022, Cooper invested CAD$175 million on fleet, and that investment is expected to continue but with a flexible approach, thanks to a loosening in the supply chain.

Doug Dougherty, CEO, Cooper Equipment Rentals

“When it was uncertain whether we could get equipment, we stocked up and said, lets buy,” Dougherty says.

“Let’s keep it coming because we don’t know when it’s going to land, and we’ve landed a lot of equipment in the last two years. Now I think we can take a flexible approach to CapEx planning and say, OK, if we see the opportunity let’s write the cheque because we know we can get the equipment.”

Spilak says the approach on fleet expansion is “very bullish.” And, although he agrees with Dougherty’s assessment of a more flexible approach, he tells IRN the company remains confident heading in to 2024; “The first cut of our 2024 planning has been coming back from our regions, and our teams remain bullish for 2024. Maybe not the aggressive growth that we’ve seen over the last three or four years, but still bullish.

“Our competitive advantage is our teams being nimble at the grassroots level within our regions and local markets. With the supply chain loosening up, we’re able to act very quickly if we need to. We see that as a positive for 2024, for sure.”

Low-carbon fleet

Meanwhile, low-carbon machines continue to be a trend within rental fleets globally. While it’s something that Cooper offers as part of its portfolio, the company’s stance is one of “the jury’s still out” on the direction low-carbon machines are going.

Dougherty says, “Is it going to be all EV, hybrid or hydrogen-powered solutions, or is it going to be a combination of all those things?

“I think it’s a little bit further along in Europe than we are in North America, but now the regulations are changing we’re going to have to stay abreast of what’s developing and be part of that evolution.

“Right now, our message to customers is that we have electric equipment in various models we can offer to you.”

Elsewhere, the company has invested in other areas and is currently testing battery storage units. At the same time, it has also made significant investments in digitalizing its processes, including work on dynamic pricing. “We have customers that have set negotiated rates for the season but then we have customers that work within transactional type deals that says, OK, we’ll transactionally discount or price the job based on the time of the year,” Spilak says.

“Something in February may be different than the rate that we would give you in September. As utilization goes up and there’s not a lot of availability, we wouldn’t discount that as much if at all, but when utilization is low we give our field more latitude.”

Spilak also highlights analytics as an element that changed the perspective on the business and revolutionized operational efficiency; “There has been a mobilization of a number of workflows within the operation, specifically on the repair, maintenance and delivery side. These processes contribute to bringing fleet through the cycle and getting it to the ready line quicker.”

Future prospects

As for the future, there appears to be no prospect of ownership changes, and SeaFort remains fully invested in the company, says Dougherty, even after 10 years of involvement, which is long

Cooper execs say the outlook is positive for the company, which expects to exceed its goal of 75 locations by 2025.

for private equity; “SeaFort takes a longer-term view and they’ve never given us any indication that it’s in their game plan to sell Cooper.

“The two major investors in SeaFort are the Sobey and McCain families, who are two very prominent business families in Canada. SeaFort is not your traditional private equity firm, it’s run more as a hybrid family office/private equity firm, so they can take a longer term view.”

One thing is certain, Spilak and Dougherty believe the prospects in Canada are bright for Cooper. It had previously outlined a target of 75 locations by 2025, which the company now expects to exceed.

Spilak reveals that new market segments could come but stops short of revealing details; “We’re constantly looking at different markets and we’re looking at two of them as we speak. I would also say within our existing specialties, of which there are five or so, there’s still plenty of room to grow those offerings across the country.” The journey continues. `