ELFF Study Says Managed Solution Transactions on the Rise in Equipment Leasing

Managed solution transactions (MST) or MST-like structures are becoming a major new offering of equipment leasing companies and are very likely to continue growing as a proportion of U.S. equipment leasing volumes, according to a study from the Equipment Leasing & Finance Foundation.

MSTs combine equipment with services into a single bundle which enable customers to make use of third-party service providers in order to avoid the hazards and obligations of equipment ownership, and realize the benefits of aligning their costs more closely with their business demands through more flexible payment, pricing, termination and refinancing terms.

“The rapid growth of managed solutions is an important strategic trend in commercial finance. The foundation has undertaken significant, rigorous research on this topic,” said Bill Verhelle, chairman of the ELFF board of trustees. “This foundation study represents the most comprehensive analysis of managed solutions completed to date by any independent party.”

The study, “Managed Solutions: Evolutionary or Revolutionary,” examines these market drivers that will provide material growth and investment return opportunities for industry participants. The study findings indicate that MSTs will:

  • Grow organically along a continuum of increasingly “bundled” equipment, financing and services.
  • Present growth opportunities for captive, bank and independent lessors across a wide variety of industries.
  • Require a fair amount of rethinking and retooling of many individual industry practices, disciplines and functions which comprise the overall business of providing equipment leasing and financing services today.

The study, conducted by by The Alta Group under an ELFF research grant, sought to research, analyze and report on the impact of this increasingly prominent business structure on the industry.

“The research confirms that managed solutions will be major drivers for the growth and composition of the industry moving forward. In fact, The Alta Group estimates that MSTs in the next three to five years could generate 22% or more of total equipment leasing and finance industry volumes,” said Alta CEO John C. Deane. “Every leasing organization has the potential to benefit from this development, as there will be many opportunities in the marketplace to leverage MSTs for growth.”

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