7 Reasons to Hate the Zipcar-Avis Deal

1/2/13Follow @gthuang

Some people make New Year’s resolutions. I make a list of reasons to hate the biggest Boston-area tech deal of the new year. I am a grump.

Yes, Zipcar (NASDAQ: ZIP), the soon-to-be-Boston-based car-rental company, is being acquired by Avis Budget Group for about half a billion dollars.

Yes, the venture capitalists who held onto their stake in the company will make out well.

And yes, the buyout is probably a good thing financially for Zipcar, whose stock price has been declining over the past year. The company, which started in 2000, has had growing pains in a tough market, and expected to post its first-ever annual profit for 2012.

But let me be clear. These are reasons why I hate the deal, not why you should (though I’m clearly not alone):

1. Jobs. When Zipcar had its IPO in the spring of 2011, Boston-area observers noted that going public—and not getting acquired—meant that talent, jobs, and innovation would stay local. No longer. Unless you hail from good old Parsippany, NJ, the home of Avis. Last I heard, Zipcar had upwards of 700 employees. How many will survive the merger and stick around? And how many up-and-comers want to go work for Avis? Maybe some, but I don’t know.

2. Anchors. The list of independent, publicly traded Boston tech companies just took a hit. With Kayak recently snapped up by Priceline (OK, Connecticut HQ, but still), the trend of local firms selling out continues. Come on, if a town like Seattle can hold on to Amazon, Microsoft, and Starbucks, can’t we do a little better? (Akamai, TripAdvisor, EMC, you are among our last hopes. Not that we’re watching.)

3. $500M is the new billion. This is self-explanatory. Zipcar’s market cap was about $1.1 billion soon after its IPO. At the time, it was worth only about 40 percent less than Avis. It was looking to disrupt the rental-car giants, not join them. All of that has changed now.

4. Alignment. Zipcar might do better with the might of Avis behind it. Then again, it might not. The big company can handle big things like fleet management and cash flow better than Zipcar could. But a big company isn’t adept at integrating new technologies and systems. Look, Zipcar is an innovative IT company that solves a very real problem (short-term car rental) for a loyal and specific customer base. The danger is that it gets diluted into just another car-rental division.

5. Access. I met Zipcar CEO Scott Griffith at a party in Cambridge a few years ago, but unfortunately I never got to know him. Now the best chance I’ll get to talk to him (while he’s there, anyway) will probably be with a team of PR babysitters in between us. Better brush up on my definitions of “synergies,” “on-demand mobility,” and “scalable opportunities.”

6. Avis vs. Hertz. OK, look, I just like Hertz better. Avis once rented me a car whose key broke off in the door. It was 1996 or something, but I’ve never quite gotten over that. But now Hertz doesn’t gain access to Zipcar’s tech talent and IT infrastructure. More to the point, Zipcar probably (eventually) gets cut down in the crossfire between two big, bitter rivals. That would be a damn shame.

7. Sharing. Can we all just admit the “sharing economy” might not take off? We humans don’t like to share. We take, take, take, and then we take some more. If someone comes along who likes to share, they usually get bullied into not sharing. (Oh, and sustainability has a nice ring to it, but it’s not the real driver here.) So let’s not call it the sharing economy anymore. Let’s call it what it is: the rental economy. And admit that it’s here to stay.

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com. Follow @gthuang

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