Interview: Don Ahern
By Euan Youdale09 October 2018
From left: John Gill, chief manufacturing officer (CMO), Snorkel/Xtreme; Don Ahern, owner of the Ahern family of companies, and Matthew Elvin, CEO Snorkel/Xtreme.
AI spoke to Don Ahern, owner of the Ahern family of companies, about the fast-changing global rental and manufacturing scene.
The name Ahern is instantly recognisable in the US rental sector, and thanks to a growing number of OEM distributorships outside the country’s borders, its influence is now being felt on a global scale.
Heading it all up is the man himself, Don Ahern. Armed with the rare ability to harness success where others only see failure, Ahern has fought his way out of some tight spots. Notably, instigating Chapter 11 bankruptcy proceedings to see off a takeover attempt of Ahern Rentals, then almost doubling its US footprint while others scaled back in the financial crises and reversing the fortunes of a global MEWP manufacturer that almost ground to a halt – namely Snorkel.
There is a notable difference between the rental and distributorship branches in the Ahern family of companies. As its name would suggest Ahern Rentals, which makes up about 70% of the total business, is strictly a rental company dedicated to the US market, with no plans to stretch beyond those borders.
The global side to the company was kick-started by the majority acquisition of Snorkel some five years ago. It is represented by Snorkel manufacturing facilities in the US, UK, New Zealand and China and the Ahern distributorships, which are designed to offer a complete sales and service package for the group’s manufacturing wing, incorporating Snorkel and Xtreme.
Ahern Rentals’ 24,500-strong MEWP fleet, with close to an additional 4,600 telehandlers, make up what the company calls its high reach offering. It represents a significant proportion of Ahern’s total 51,000 unit rental fleet.
“The North American rental market is as good as it’s ever been,” says Ahern. “We have statistics that we have tracked for decades, and one of the primary statistics is the average rental rate and it’s at an all-time high. Utilisation is very good too.” says Ahern, before qualifying it with a more cautious statement. “I feel like we are on the front side of the bell curve but we do feel that we are on the top, or towards the top.
“I don’t think we are going to have a downturn but 2019 could possibly become the top of that curve. Things will level out.”
Ahern points out that he has been around long enough to learn that cycles are a part of life. “My father started the company the year I was born and never in those 65 years has there not been a cycle. To expect things to be different is a kind of insanity.
“We had a very slow recovery after the last downturn, which from Ahern Rentals’ point of view was the middle part of 2010. It was tripping along the bottom of the ocean through 2011 and 2012. Once it started taking off after 2012, the measurable improvements were felt day-after-day, rather than month-after-month.”
Between 2009-2010 Ahern Rentals opened 35 major depots, moving the company beyond its traditional central/west base. “We came back with a national footprint,” says Ahern. “In a way that was one of the real diamonds in the rough. You could cut the US into four segments from east to west, we now have an equal amount of revenue in each quadrant.”
That come-back was made bitter-sweet with the ensuing Chapter 11 drama that befell the company. Ahern filed for Chapter 11 bankruptcy proceedings during a difficult financial period, in which the company received an unwelcomed takeover bid and saw bankruptcy as the only option to keep ownership of the company. “We were forced into Chapter 11 by a hostile takeover,” says Ahern. “We were actually never bankrupt, in fact, we had $51 million of liquidity, which is substantial.”
Ahern is also keen to remind the industry that he honoured all debts, “100% of debtors, including unsecured creditors, were paid. “Usually, in bankruptcy there are losers and there were no losers with us. That is very important to me. There is a certain amount of shame that comes with the word bankruptcy, but you can do it right and honourably. And because we had lots of money, we paid every invoice we could find. Everyone got paid.” Ahern Rentals finally exited the Chapter 11 process in June 2013.
In a fitting testament to that integrity, the Ahern family of companies flew past the $1 billion revenue mark, in the last 12 months (LTM) previous to the interview carried out in mid-May and is on course to hit $1.1 billion.
It may be a surprise to learn that Ahern Rentals is neither interested in acquisitions nor moving outside the borders of the US. “From the rental point of view, we will continue to grow at a very steady moderate growth, exactly as we always have, and it will be organic, with certain types of debt instruments.”
He adds, “There is absolutely no opportunity for us to do rental outside the US, and we would not look at a rental company in any foreign country at all.”
One of the reasons being, as the OEM side of business grows internationally, Ahern doesn’t want to muddy the waters with an international rental company. “Our customers are predominantly rental customers. We don’t want to compete with them.”
Although, that isn’t the primary reason. “Sales are different to rentals, it’s cultural. Rental is done in a local language with local traditions, and relationships that spawn from childhood, all the way through adulthood.
“I think it’s very challenging for large rental companies being involved internationally - to be effective when they are not dealing in their native languages. I know others think differently, particularly in Europe.”
The 3,000 square metre production facility in Jintan, outside Chanzhou, China.
As Matthew Elvin, CEO of Xtreme Manufacturing and Snorkel, adds, “One reason European companies are cross border is because countries are smaller. The US is such a large marketplace you can be more than happy in the US without going anywhere else. Ahern has 92 branches and has still got a lot of room for opportunity just in North America.”
On the subject of OEMs and Ahern’s majority acquisition of Snorkel in 2013, has the company become everything he expected it to be? “Almost,” he replies, “We are very pleased with it. We have taken a company that was distressed and was barely operating and was probably within a very short time of not operating. “You could call it ground zero, and now we are annualising around $300 million.”
Apart from heavy financial investments, there have been substantial changes to make production leaner and meaner. For example, the company recently created the new role of chief manufacturing officer (CMO) and promoted John Gill, who joined the company in 2016, to the role. He reports directly to Elvin.
As Elvin explains, “It has gone from a company that didn’t really respond to the market to one that now puts it money where its mouth is. We have customers returning to the business that left the brand during that period. There is an opportunity and desire for other choices in the market place, like us.”
Among the growing number of distributorships are Ahern Australia, Ahern Japan, Ahern Deutschland, Ahern Canada and Ahern Chile. Where applicable they also distribute products from other manufacturers, like Ruthmann’s Bluelift brand of tracked platforms in Australia and the UK. The are 11 of these outfits so far, with the 12th about to be opened. Ahern would like to have 100 of them in the next 10 to 15 years.
Taking the arrangement to the next level, Ahern also employs independent dealers to sell its products, either through its distributorships or directly from OEM level. “It’s important to be clear about the difference between dealers and distributors. Our model is to create distributors with our name: Ahern Deutschland, Ahern Australia. Then we sign dealerships that spawn out of those; a lot of those are rental companies.
Will the heavy-duty Xtreme Manufacturing telehandler products have a future outside of North America where they have traditionally been sold? “Absolutely,” says Ahern, “We have already pushed some of those outside of the US, particularly in mining and heavy industry.”
As with many manufacturers, Ahern is watching the emerging access nations too, and calculating the right time to make a move. One of the regions on the radar is Southeast Asia. “That’s just one of the open territories for us. We have dealers that work directly in those areas. There is nothing to say we couldn’t put a distributorship there so that we have local time zone, language and spare parts – so you can have same day events, that’s our model.”
Towards the end of last year, Snorkel officially opened its factory in China, to primarily establish and support the Chinese market. The plan is to produce for the local market, rather than it being an international production facility. As Elvin explains, “To be brutally honest we are not in a hurry, we want to get bedded down and get it right. We are very much listening to our customer base as to what should be the next model.”
In 2018 Snorkel is releasing the new 400S and 460SJ mid-size telescopic boom lifts. The Snorkel 400S delivers a working height of up to 14.2m, while the Snorkel 460SJ (pictured) offers a working height of 16m.
One thing, among others, that connects the OEM side of the business to Ahern Rentals is the concentration on sales to Tier 2, or independent rental companies. “We consider ourselves independently-owned and we certainly prefer and target the independently-owned folks,” says Ahern.
“The independents are the majority of the market. The real dominant people in the rental industry are the independents, so, we would rather go where the winners are.”
Looking at the US as an example, Ahern believes the rental market stands in the lower to mid-$40 billion-dollar revenue bracket. Adding up the rental revenue from the mighty players like United Rentals, Herc and Sunbelt, Ahern calculates it comes to just over a fifth of the total annual market, with independents being in the vast majority.
“So, for Snorkel and Xtreme it is logical to go where the majority of the business is, where there are thousands of people who make decisions and not just one where it is win or lose. For those reasons we stay away from the top five rental companies.”
One thing is clear, some of the biggest rental companies in Europe and North America are focused on acquisition. For Ahern it’s a gift. “We absolutely love it. There isn’t anything that can happen better for us than United Rentals buying somebody. The flushing out of fabulous employees we can embrace, love and cherish. It is not only good for employees but for customers.”