John Phillipou, chief executive of PEAC, talks to Brian Cantwell about the business’s recent progress and acquisitions, and the processes and challenges involved in building a European leasing business from the UK.
In 2016, HPS Investment Partners (UK) LLP bought American lessor CIT Vendor Finance UK.
CIT had been prime for acquisition: it had excellent vendor relationships but had been through chapter 11 bankruptcy, which allowed it to reorganise its business and pay suppliers by involving a corporation or partnership.
As part of the acquisition, HPS incorporated CIT Vendor Finance into its newly created Pan European Asset Company (PEAC), a platform established to consolidate asset finance businesses and portfolios across the European SME lending space.
HPS brought in John Phillipou from Deutsche Leasing in May 2017 as chief executive to build his own management team.
“When I came in, in May, a lot of organisation had to happen over the next six months,” says Phillipou. “At that point in 2016, the idea of a pan-European asset company was a nice-sounding idea, but that really needed to be looked at – two years in and a lot of the systems were changing.
“I’ve started selecting my own team: we hired Oliver Greenslade as director of credit in October 2017, who was head of risk for Investec, and a collections specialist, Carl Seaton from Société Générale, another young but experienced collector.”
CIT had a European footprint that was born out of Dell Financial Services. The CIT Europe base was 20 countries, supported by a service centre in Dublin that at one stage had over 500 staﬀ, and was multilingual.
“We still have that capability, and have maintained that office in Dublin. As we are acquiring and growing in Europe, that Dublin hub will become more important,” says Phillipou.
In March, PEAC added German lessor IKB Leasing to its platform, with subsidiaries in 10 countries. “Over the last month are now starting to put into practice all of the changes. We have rebranded, with a completely new look and feel to the company,” says Phillipou.
“This includes adding staﬀ to a business with a revitalised culture, and picking young motivated staﬀ who want to stay and work at the business,” he adds.
With change come challenges, and the main challenge for the new parents was coming to understand the asset classes, and building to support them.
“PEAC historically has been a 95% soft asset business,” says Phillipou. “My background from my time at Deutsche Leasing was obviously both counts: hard and soft assets.
“Moving into the hard asset sector, you have to build it properly on the inside. Again, this is where the infrastructure is now in place in terms of how we deal with hard asset deals, and we are widening away from just broker into vendor business as well.
“We are not going to be a volume player at low rates, but then no one in the market should be doing that. We have invested heavily in systems and process – the investment was made with growth in mind,” notes Phillipou.
He adds that the plan is to be individual. “We don’t want to go toe to toe with the banks and main leasing companies. But we do want to oﬀer a very fast point of sale, through e-sign payout through broker-lenders in the hard and soft asset section.”
A European business
The challenges that PEAC have are consolidating and building its European business, which involve handling local cultures in diﬀerent disciplines.
“There is still a massive diﬀerence about how diﬀerent countries go to market and how they
think in leasing, although the general product and the general funding basis is the same,”
“I think the main challenge is a fear or cynicism in the UK about why you would want a European business.
“We don’t feel that; we see it as opportunity. I would say the fear is in larger financial organisations and banks more than in a company like ours, and that’s created an opportunity. There are portfolio opportunities and growth opportunities because big corporates are concerned about how the new
Europe will look.”
To protect against macro-based shocks, you have to be dynamic, says Phillipou, which includes treasury solutions at local level and creative deployment of funds in each country.
“If we were a bank, we would have a central treasury function that would have to come through that one bank channel. It would be a lot more difficult than the way we are set up now, with which we can negotiate in each jurisdiction to find an individual solution,” says Phillipou.