Frankfurt Flixmobility, one of the most successful German mobility start-ups, is making a big hit in the USA. The start-up takes over the well-known US bus service provider Greyhound. The company announced on Thursday morning. This makes the company, which has been active in the USA since 2018, in one fell swoop to number one in the American long-distance bus market, in which around 62 million passengers a year used the buses until the pandemic.
Flixmobility is acquiring the buses, their drivers and the brand from the British First Group, the largest bus operator in Great Britain and owner of Greyhound. The package does not include Greyhound’s real estate and pension obligations or operations in Mexico.
André Schwämmlein, co-founder and CEO of Flixmobility, is quoted in a statement as saying that a convincing offer will move significantly more travelers away from the car to long-distance buses: “Together, Flixbus and Greyhound will be able to better serve this demand.” Company on sale for $ 172 million, including $ 140 million instantly.
Flixmobility – the company was founded in 2012 – is the holding company for the two brands Flixbus and Flixtrain. The company is owned by numerous investors, including General Atlantic and Permira. According to the latest information, the three founders Schwämmlein, Jochen Engert and Daniel Krauss still hold just over 25 percent of the shares.
Top jobs of the day
Find the best jobs now and
be notified by email.
The core business is not driving buses and trains. The management would rather leave that to partners who also keep the vehicle fleet. Instead, Schwämmlein and his team see themselves as technology and platform providers through whom, for example, the bookings are made.
With Greyhound, Flixmobility now has more than 1000 buses – with an average age of over five years. Here the Flixmobility top should have done some work to convince the previous investors. Because the purchase means a certain departure from the strategy of having as few burdensome “assets” as possible on the balance sheet (asset light).
Over time, however, the management is likely to convert the business model in the USA to the platform approach and gradually fall back on the services of external bus companies. Flixmobility is proceeding in a similar way in Turkey. There, in 2019, the bus provider Kamil Koc and its “inventory” were taken over and are currently being integrated into the existing business model.
The core business is not driving buses and trains. The management leaves that to partners who also keep the vehicle fleet.
(Photo: imago images / STPP)
“This is about more than just the icon greyhound, it is about the US market that you buy,” can be heard from circles close to the negotiation. Flixmobility is not alone in this. The American mobility market is also interesting for other German companies.
The car rental company Sixt has grown strongly there in recent years, has opened numerous new stations and expanded the car fleet. Sixt is now represented at almost all major US airports and is enjoying great demand because more people are traveling again.
IPO is not excluded
The takeover of Greyhound is also interesting with a view to a possible IPO of Flixmobility. According to the latest statements by the management, there are no concrete plans for a so-called IPO, but such a step is not ruled out either. One thing is certain: if you have a strong operational presence in the world’s largest capital market, you will find it easier to find investors in the future if you go public.
Flixmobility CEO Schwämmlein had repeatedly emphasized in the past that he wanted to become the market leader in the USA. He also did not rule out acquisitions. “At the moment we are growing very strongly organically in the USA. But of course we’re always looking at how we can expand, and in the medium term we want to be number one there too, ”the entrepreneur told Handelsblatt a few weeks ago.
Greyhound is an icon in so-called intercity bus transport in the States. With a fleet of around 1200 buses, the company carried 16 million passengers per year to and from 2400 locations in North America until the start of the pandemic. This makes the company the largest provider. The cheap rival Megabus carried around six million passengers a year in the United States until the crisis.
However, the corona crisis has hit the greyhound hard. Up until the crisis, around 40,000 passengers carried the brand with the Greyhound logo every day, in the end it was only 10,000. The First Group’s annual report shows that Greyhound incurred a loss of $ 12.1 million – the equivalent of EUR 10.4 million – in fiscal year 2021 (through March 2021). In the previous fiscal year it was even minus $ 15.3 million. Sales collapsed from $ 766 million to $ 422.6 million.
The workforce was more than halved to 2,500, including through partial sales and the closure of the plant in Canada. Around 600 buses were taken out of service due to Corona. Nevertheless, there is still some work waiting for the management of Flixmobility in the USA. When converting to the platform model, the unions, which traditionally have a strong presence at Greyhound, have to be brought on board.
In addition, there is competition with the low-cost airlines in the USA and with bus rivals, some of them regional, on shorter distances. Business came under pressure even before the pandemic. The operating profit margin dropped from 6.2 percent in the 2017 fiscal year to just 0.3 percent in 2019. “The competition from airlines influences the demand for bus and train travel, especially in Greyhound’s long-haul business,” says the latest annual report from the previous owner, First Group.
Flixmobility has created financial leeway
Greyhound has been in the shop window since 2019. First Group, the largest bus operator in Great Britain, decided to focus heavily on the US business. But the investor Coast Capital, who held ten percent of the British company, urged management to make a radical shift in strategy in 2019.
The First Group is now concentrating on its home market of Great Britain and is gradually separating from other activities. However, the First Group has not yet found an investor for greyhounds – probably also because of the pandemic. Flixmobility is now seizing the opportunity. The start-up company created the financial leeway for this a few months ago.
At the beginning of June, the team around CEO Schwämmlein raised $ 650 million. Existing investors such as General Atlantic, Permira, TCV, HV Capital, Blackrock and Baillie Gifford participated in the financing round – a mixture of capital and loans. With Canyon Partners, Flixmobility was also able to win a new investor.
As a result of the financing round, Flixmobility achieved a valuation of three billion euros and is therefore one of the most successful start-ups in Germany in the mobility sector. With the money, Schwämmlein and his team want to “make green and affordable mobility available for as many people as possible” and at the same time become the global market leader.
This has already been achieved in large parts of Europe. Flixmobility is a kind of monopoly in the German long-distance bus business with a market share of 90 percent. The company is also active in Great Britain, France, Turkey, Eastern Europe and, since May 2018, also in the USA. A presence in Brazil is currently being established.
So far, the company has been rather frugal with business figures. According to the Federal Gazette, Flixmobility achieved group sales of around 970 million euros in 2019, and the net loss rose from 15 to 61 million euros. However, this is a consequence of the high marketing expenses and acquisitions. The young company’s green buses are already operating profitably in many markets, including on the west coast of the USA.
More: Flixmobility boss Schwämmlein: “Nobody wants to change”