When Houston residents think of Avis, they think of rental cars. But Avis wants to branch out past that solitary business venture and get into the car-sharing market. That is why it is purchasing Zipcar for $491 million.
Car-sharing is a trend that has taken off in the last few years. Essentially, companies like Zipcar and its rivals, like HourCar, own fleets of cars that users can rent for short periods of time. It is a concept that has especially gained traction in concentrated urban markets where it is impractical for people of average means to own and maintain cars, such as San Francisco and New York City.
With 76,000 members, Zipcar is the largest car-sharing service in the world.
In a statement, Avis' CEO said he anticipates that Zipcar will help Avis meet its growth goals. Although he did not mention this in his statement, the acquisition will also help Avis keep up with its adversary Hertz, which runs its own car-sharing service, called Hertz on Demand.
As this story shows, mergers and acquisitions are instruments that well-established companies, like Avis, can use to broaden their portfolio of offerings, adapt to market changes or keep up with their rivals.
Source: USA Today, "Avis to buy Zipcar, enter car-sharing business," Charisse Jones, Jan. 2, 2013