Why has United Rentals spent $1.1bn on a temporary roadway business?

The rental industry always has the capacity to surprise. Who would have put money on United Rentals’ next billion dollar acquisition being a company that rents temporary matting for contractors and utility companies?

But that is what has just happened, with United paying $1.1 billion for the three Yak businesses in the US - Yak Access, Yak Mat and New South Access & Environmental Solutions – which supply temporary roadways and mats for contractors and utility companies.

Yak Mats provide temporary roads for contractors and utility companies. (Photo: Yak Mat Facebook page)

The deal will add annual revenues of around $350 million and create a new ‘Matting Solutions’ business within United’s specialty rentals division.

The initial reaction might be surprise but, of course, temporary trackways and ground protection panels has been a rental business for many decades. In the UK, for example, Eve Trakway was the market leader for years before its acquisition by Ashtead Group in 2013. Sunbelt Rentals now provides that service in the UK and Ireland, as well as mainland Europe through locations in France and Germany.

In the case of United Rentals, there is a clear logic for the deal, beyond the basic revenue and customer base that the deal will bring. That is based on the returns of specialty rentals and the particular appeal of Yak’s customers.

Specialty attraction
United was already investing in specialty rentals, which last year accounted for $3.26 billion of its total $14.3 billion revenues. The gross profit margin on specialty was 48.9% last year, compared to 36.6% for general rentals.

Specialty also grew at a slightly lower rate than general rentals last year, so, given its higher margins, there was clearly a desire to move a bit faster on growing that business with the right deal. (Specialty represented 28.8% of United’s revenues last year, up from 10% in 2013.)

On the customer side, according to United Yak “predominantly serves customers in the utility and midstream verticals”, a sector “supported by attractive…opportunities across both the energy and power markets, funded by public and private investments.”

United is expanding its exposure to the US utilities market, as anyone who saw their booth at last year’s Utility Expo could testify. The company told International Rental News at the show that it was making a “significant investment” in the utilities market.

Now it will be able to offer its existing customers in that market the matting products, and at the same time rent a fuller range of equipment to Yak’s clients.

As Matthew Flannery, president and chief executive officer of United Rentals, said, “In addition to [Yak’s] attractive profile across growth, margins and returns, this combination builds upon our Power vertical strategy, where significant investment in generation, transmission and distribution is expected over the next several decades.”

Diversification benefit
It also further reduces its reliance on traditional construction markets. Construction, both non-residential and residential, accounted for 51% of United’s business in 2023, with industrial and other sectors making up the rest, including power and utilities. Yak’s temporary roadways will further tip the balance towards non-construction.

One final thing that this latest acquisition says about United: the bigger it becomes, the more difficult it is to make ‘transformative’ deals. $1.1 billion is a lot, but the $350 million revenues it buys represents less than 2.5% of total sales last year. Even in its specialty rentals segment, Yak will add just over 10% to its revenues.

And of course, United still has an estimated market share of just 15% in North America, ahead of Sunbelt (11%) and Herc (4%). There is still a tonne of scope to expand, and perhaps in some less surprising directions.

United Rentals makes show of strength at Utility Expo Rental company takes biggest stand ever at Lousiville show