In his first interview since the launch of his new venture, Marwyn European Transport, David Leeder tells Robert Jack about his plans to expand in the German bus market.

A growing proportion of the UK passenger transport operations are foreign-owned. It’s part of a global trend. Passenger transport operations are being consolidated by large multi-national players like Deutsche Bahn and Veolia Transdev. But David Leeder, formerly development director at FirstGroup, one of the world’s largest passenger transport groups, believes that the vast majority of opportunities are too small to show up on the radar of these global giants. He has co-founded a new venture, Marwyn European Transport (MET), to pursue these opportunities, and its initial focus is on Europe’s largest passenger transport market – Germany.

Since leaving FirstGroup in 2009, Leeder has maintained a low profile and has not spoken publicly about his new venture, which had a low key launch in February 2011. However, following a run of three acquisitions of German bus companies in the past eight months, he is now ready to go public with his growth strategy for MET.

“I realised when I was looking at acquisitions for listed companies that when you’re very big you have a very small universe of things you can buy,” Leeder explains.

“Either they’re not for sale or they’re too small. They’re too small to make a difference and they’re too small because you can’t afford to spend enough management time on them.”

MET has been established to pursue investment opportunities at the smaller end of the market. “It’s like the dinosaurs versus the early mammals,” he says. “We hope to be a more fast-evolving small business.

“If you’re an enormous company you have to eat a lot of meat every day to stay alive.”

During his 20-year career in passenger transport, Leeder, 45, has experienced life amid both big beasts and small creatures. After beginning his career as a senior management trainee with British Rail, he moved to the bus industry to work for Harry Blundred, a post-deregulation pioneer. Blundred’s business, Thames Transit, was the ultimate fast-evolving small business. It thrived on the new commercial freedom provided by deregulation, growing rapidly before its sale to Stagecoach in 1997.

By the time Leeder was 30 he was chief executive of Travel West Midlands and he followed that by taking charge of the UK’s largest bus operator, First UK Bus, in 2001. Four years later he took on the role of development director for FirstGroup, which saw him identify and lead bus and rail deals in the UK, Europe and North America.

After leaving FirstGroup in 2009, Leeder teamed up with award-winning investment manager Marwyn, seasoned investors in acquisition-led growth strategies. MET was formed, with Leeder as its chief executive.

MET was set up to explore opportunities in bus and rail across Europe, although its also keeping an eye on the UK. The initial focus has been on Germany’s fragmented and complex bus market, which offers MET a myriad of investment opportunities and since its launch in February 2010 it has acquired three German bus companies and two more are currently in due diligence.

The first acquisition was Tücks, the operator of around 100 buses in the Rhine-Ruhr region of south west Germany, which was purchased from its husband-and-wife owners for 3.75m Euros in July last year. Mr and Mrs Tücks have stayed on as part of the deal and they will receive additional value if performance targets are met. MET has provided them with the capital to exploit opportunities that exist in their area, and technical help on everything from rostering and timetabling to marketing.

Leeder says that there are many more bus company proprietors like Mr and Mrs Tücks who are willing to sell but don’t simply want to take the money and run. Who they sell to, and what happens to the business afterwards, is important to the owners of companies that may have been run by their family for generations, and often bear their family name. MET offers them the opportunity to remain at the helm, retain the identity of the business and receive rewards if they develop it further. “We are not likely to be the highest bidder for these assets but I think we are the good custodians,” Leeder explains.

There is no desire to have lots of buses running around in Germany with ‘Marwyn European Transport’ on the side. Leeder believes that a decentralised approach is the most appropriate for Germany’s complex and fragmented bus industry, where the regulatory regime often differs between regions. With their extensive local knowledge and experience, Mr and Mrs Tücks are able to spot opportunities, such as school bus contracts in small towns, that would be missed by a larger group. “They had a vision for growing that business but he didn’t have access to capital. We’ve helped them on the capital side and we’ve helped them bid more quickly and rigorously, and think of new ways of doing things, says Leeder. “In 15 years they’d gone from 15 buses to 100 buses, and in a year they will have gone from 100 to almost 200. It’s a big step up in what they were able to do.”

The same approach has been taken at BRH, formerly FirstGroup Deutschland, which was purchased by MET in September for 5.5m Euros. This business, which had stagnated under its final year of FirstGroup ownership, operated more than 130 buses in the German regions of Hesse, north Baden-Württemberg and Rheinland-Palatinate. The company’s margins have already improved.

The third deal is the smallest, but is perhaps the one that has attracted the most interest. The German express coach market, is opening up, having been severely restricted since the 1930s in order to protect Deutsche Bahn’s rail services. The potential market is huge and the UK passenger transport groups are watching closely. Leeder believes there is a lot of “froth” about this opportunity, and he believes that the market will not liberalise with the big bang that some are expecting. However, MET entered the market in January this year with the purchase of Publicexpress, the operator of a cross-border service linking Groningen in The Netherlands, with Oldenburg and Bremen in northern Germany.

The rules on cross-border coach services have already been relaxed and Publicexpress was formed in 2005 by Christoph Marquardt, a former employee of DB. Marquardt retains a 5% stake in the business.

Leeder describes Publicexpress as being akin to a Stagecoach Express or Green Line service in the UK. Marquardt has built the operation up from nothing and the deal with MET offers him the capital to develop it and access to expertise on marketing and pricing.

Publicexpress has now introduced flexible fares, something which the German transport sector is not familiar with. It’s not true yield management. Instead, different colour-coded fares are offered for different services, depending on the time and day. In the UK, this easy-to-operate system is used on FirstGroup’s Green Line services between London and the Thames Valley – “I own the copyright on that one,” Leeder jokes. One-way fares between Groningen and Bremen now range between 7.50 and 23 Euros. Although the management team were initially apprehensive about the system, the signs are that it’s working.

Meanwhile, Britain’s passenger transport branding guru Ray Stenning, of Best Impressions, has been commissioned give the service an exciting new look and feel. There are new vehicles coming in too, with the fleet set to expand from three to 17 this year.

Leeder stresses that these changes have been implemented through partnership with Marquardt and his team, and not by diktat. It is, after all, the local management teams that MET is depending on to deliver growth, and all three of the subsidiaries have expanded rapidly. MET’s fleet is now approaching 400, and the company was recently described by one German trade magazine as a ‘Mittelstand’ company. The term refers to small and medium-sized enterprises in Germany, and these companies are often credited as being the powerhouse of the German economy.

Leeder is pleased that MET is already being viewed in this way. “This is exactly what we want to be,” he says. “We think of ourselves as the friendly transport experts, with some capital behind us, rather than one of the faceless, mega-bureacracies.”

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