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Too bad Zipcar isn't taking over Avis

Posted by Dante Ramos  January 2, 2013 02:15 PM

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If Zipcar were buying Avis, instead of the other way around, the Cambridge-based car-sharing company's fans would be happier today than they are.

This should be good news. The car rental giant's $500 million purchase of Zipcar is great for stockholders, since Avis is offering 49 percent more per share than Zipcar's closing price Friday. In theory, the takeover is also a half-billion-dollar validation of the idea of car sharing; what once seemed like a utopian social experiment increasingly looks like a mainstream, even essential service for city dwellers who only drive every so often. It should help that Avis buys a lot of cars; Zipcar will be able to buy vehicles more cheaply and make more of them available at peak times. Avis, in turn, gains a foothold in a growing business that archrival Hertz is also pursuing aggressively.

What the car-rental giants need, though, is an infusion of the convenience and low-hassle ethos that new companies like Zipcar offer. Whatever else it is, Zipcar is a response to common frustrations with the conventional car-rental industry — the Soviet-style lines at the rental-car desk, the paperwork, the stiff gasoline charges, the so-called "reservations" that might or might not involve the actual reserving of a vehicle. It would be intriguing to watch entrepreneurs with a start-up mindset try to reinvent the car rental industry; but if the car-rental industry reinvents the likes of Zipcar, it won't be a pretty sight.

For now, Zipcar will operate separately from Avis and remain in the Boston area. The car-sharing company will go through with plans to move from Cambridge to Boston's Innovation District, news reports indicate. Yet these provisions in merger agreements tend to erode over time. Corporate convenience is a powerful force: Executives want to keep a closer eye on the new division they spent a pile of money to acquire; companies feel pressure to save on rent and travel costs. The $50 million to $70 million in "synergies" that Avis is projecting has to come from somewhere. And soon enough, what began as a hip urban start-up ends up as yet another set of cubicles at Avis headquarters in a Parsippany, N.J., office park.

It doesn't help that Avis has a long history of mergers and acquisitions that serve no obvious business purpose; the company itself has been bought and sold more than a dozen times, often to ill effect. Customers and transportation planners alike should hope Zipcar fares better.

Twitter: @danteramos

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ABOUT THE ANGLE Online commentary and news analysis from the Boston Globe. The Angle is produced by Rob Anderson and Alan Wirzbicki. You can follow Rob on Twitter at @rcand.

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