Interview: Why Element Purchased The CEI Group
President and CEO of The CEI Group Wayne Smolda (right), Claudia Smolda (center), and the rest of CEI's management team will remain with CEI as part of the acquisition. Wayne Smolda will report to Jim Halliday (left), president and CEO of Element Fleet Management International.
Element Fleet Management Corp. purchased fleet safety and accident management provider The CEI Group on Dec. 30, 2016, for an undisclosed amount. The CEI Group and Element Fleet Management North America will continue to operate as separate entities. Each reports up to Element Fleet Management Corp., the parent company located in Toronto, according to Element Fleet Management International President & CEO Jim Halliday and CEI President & CEO Wayne Smolda.
Smolda and CEI’s management team will remain with the company. Smolda will report to Halliday who reports to Brad Nullmeyer, CEO of the Element Fleet Management Corp. Once these businesses are combined, CEI will serve nearly 900,000 vehicles, provide safety services for more than 250,000 drivers through DriverCare, and handle more than 250,000 claims per year.
To learn more, AF jointly interviewed Smolda and Halliday. Here are excerpts from what they told us.
AF: How will the acquisition of The CEI Group be structured?
Smolda: Element’s plan is to move its Accident Management, Risk & Safety services programs to CEI, working under the CEI brand. As of Dec. 30, we announced to all of our employees that CEI now has a new owner of the company, which is Element Fleet Management Corp., headquartered in Toronto. The CEI management team will continue to run the business. I report to Jim Halliday.
CEI will have employees in three locations: Eden Prairie, MN; Sparks, MD; and Trevose, PA.
Our employees were very happy to hear that news, because it secured our relationship with Element well into the future.
And, Element is going to help us to expand internationally. They have a strong international presence, and we’re going to continue to drive innovation and expansion of our Fleet Driver Management strategic core competency.
Our fleet channel partners will still continue to do business with us. We’ll protect their interests, and Element will make sure there’s compliance around that. We will continue with everything branded under CEI.
AF: How will the Element in-house fleet safety team in Sparks be affected by the acquisition?
Halliday: This team has more than 100 associates, and they serve Element direct customers using an in-house application. The Element Accident Management team will continue to report to Tom Keilty, chief operating officer for Element Fleet Management North America. The team will transition to the CEI organization and platform by 2018. This transition will be led by an integration team that engages leadership in both locations to ensure we have a winning plan.
CEI has done an amazing job with its fleet management company channel partners, keeping us all separate. We’re going to operate the CEI business very independently. It’s going to be branded CEI. You won’t see a lot of changes from our perspective, other than Element will support CEI with capital to help it grow. The management team at CEI will stay in place.
Smolda: Our company is getting very big. We’ve grown from 250 employees to more than 350 employees, and now we will handle close to 900,000 units under our program operated by 1,200 to 1,300 accounts. Through Element’s support, CEI customers will benefit because we can continue to lead in the development of the best accident and safety products, services, and technologies.
AF: Is CEI now a subsidiary of Element?
Halliday: Yes, CEI is a subsidiary of the parent company, Element Fleet Management Corp. However, CEI is not a subsidiary of the Element North American fleet business. We thought that was really important in order to serve the industry.
There are a number of other models where this has worked well in our industry. For instance, Holman Enterprises has done a nice job in keeping Auto Truck Group separate from its fleet management business. Auto Truck Group today serves a lot of competitive fleet management companies.
Another example is when Cendant owned PHH, it also owned WEX. WEX was able to create partnerships with other FMCs in the industry. Perhaps more important to us was the fact CEI has already been securely and satisfactorily serving multiple FMCs for the past 32 years.
AF: Why did Element acquire CEI?
Halliday: There are a number of key reasons. First, CEI is the leader in accident management and safety technology with an outstanding customer base. The acquisition builds on that leadership position. When combined with Element’s award winning accident management business it will be game changing for customers. We also were very impressed with CEI’s people expertise and technology platform and the ability to leverage both to further grow the business.
Finally, Element wants to move into a number of adjacent markets, such as further serving the insurance industry. CEI gives us greater access to do so.
We think it is a winning combination for customers. Element brings the ability to add additional resources and capital, and CEI brings a proven business model that has worked for many years. With Elements’ support, CEI clients are assured of being first to benefit from the most innovative technology, products, and services. It’s a winning combination.
AF: Why did CEI decide to sell to Element?
Smolda: We invest a lot of money every year on innovation and technology. The way we’re able to do that is through growth, and the momentum we’ve created for ourselves.
My objective is to always keep the momentum going, no matter how much of a market lead we have. This purchase by Element gives us a chance to leverage our resources to continue to do the best for our customers, while we continue to plow money into R&D, technology, and innovation and maintain our momentum and velocity. From my standpoint, it is a natural marriage.
Halliday: CEI has amazing long-term customers, a leading technology platform and a great business model. That’s completely in line with our own strategy and what we look for in acquisitions. We want to invest in companies with great business franchises, and services businesses that have a great track record of delivering industry-leading solutions to their customers. With the combination of CEI and our own accident management platform, we see big opportunities in predictive analytics and artificial intelligence supported by further data integration.
As I discussed earlier, we’re going to keep the fleet businesses very separate, but there are ways we can help each other collaborate on some of the technology that will benefit all customers. It’s a perfect fit from my perspective. It just makes a lot of sense.
Smolda: We’ve been working on a lot of technology-driven projects, such as our cloud-based, enterprise-wide CRM system. Our integrated accident and safety driver mobile app will be launched this spring. All of this can be leveraged at a much higher scale with Element’s support. I feel very confident that the money we’re investing is going to help us expand our business and remain the market leader.
The other thing that excited me about Element is that they respect our special interests in protecting our partners, like our insurance company and channel partners.
AF: Element has launched a brand-new technology platform called Xcelerate. Is there going to be integration of the CEI platform with Xcelerate?
Halliday: There will be data integration with Element’s new technology platform and CEI, just like the way that other CEI channel partners integrate CEI data into their systems for their customers. One of Element’s thresholds for tuck-in acquisitions is the ability to integrate data with Xcelerate. Note that only Element customer account data will be integrated into the Xcelerate platform — not all CEI customers.
AF: What are the key differences between what CEI offers in terms of its safety and accident management program vis-a-vis what Element offers?
Halliday: CEI has a deeper driver product offering and larger suite of risk and safety products. If you look at the base product, specifically the accident management product and the services, they perform much the same functions. But how they get there is somewhat different.
We’ll make sure that any product and service gaps are addressed as we bring Element’s accident business onto the CEI platform.
AF: Are there other growth opportunities you envision coming out of acquisition?
Smolda: We’re hard at work growing our share of the truck market. I think that our competency, which we call ‘fleet driver management’, is very meaningful for truck and mixed car-truck fleets.
We’ve also been working with a university for five years to build a predictive analytics model for driver behavior. We started to collect predictive customer data last year, and now that we’re armed with quantifiable proof of its value, CEI will be first to deliver a prescriptive analytics solution.
Fleet Driver Management focuses on those employees who need to remediate poor driving behavior that has consequences for the workforce and the business. As I mentioned earlier, the insurance market may want to adopt some of these services. Insurers today simply drop a policyholder if they have poor driving behavior.
I think it’s going to get to a point where insurers will recognize that it might make more sense to remediate a bad driver and keep them as a policyholder. Our Fleet Driver Management technologies can play a bigger role in helping insurance companies build bigger portfolios of long-term customers.
AF: Do you foresee any growth opportunities in the insurance market?
Smolda: The insurance industry handles about $25 billion worth of claims volume. I think that with Element we have a chance to really go after the insurance market in a big way.
We already are one of the leading providers in the insurance space, and a part of our business is dedicated to it. We’ve been in that business for 15 years, and insurance has the biggest share of the accident market of all vehicles operating in the United States.
The integration of Element account data back into their systems, like we do with other channel partners, will be part of the integration process that has been underway for the past six months. What we do here will end up being translated into their management system so Element customers will have a full view of everything that’s happening in their account.
AF: Recently, CEI has assembled a global alliance of companies. How will it interact with the Element-Arval Global Alliance?
Halliday: The Global SafeDrive Alliance is very complementary to what the Element-Arval Global Alliance offers our customers from a global fleet management perspective. We think our global customers will be very interested CEI’s product offering here.
Today, there aren’t solutions on a global scale on an integrated technology platform where you can see how things are progressing in safety training and driver behavioral scoring on a global fleet basis coupled with global accident and fleet data. That’s what CEI and its partners have put together. We expect CEI could do this for any other global fleet company.
We think global risk and safety will be more important going forward. Today, we see global safety solutions as a growing requirement for multinational clients. It always comes up in the global fleet conferences, and other industry events. Global safety and risk policies and solutions are certainly something that companies can execute on more easily that perhaps other areas of fleet management.
We’ve been looking for products to fit into a global platform so this is a great fit from that perspective.
AF: Are there any additional messages that you would like to convey to the readers of Automotive Fleet?
Smolda: First, the CEI field sales organization and marketing teams stay in place at Trevose. Second, when a new customer at Element signs up for the accident management or fleet safety program, it will be the CEI service programs.
Halliday: The goal in the near term is to enhance the CEI platform so that it has the comprehensive functionality that Element customers on the Sparks platform enjoy. Over the longer term, it is to accelerate advancement of CEI’s risk and safety solutions organically, through partnerships, or potentially through acquisitions.
We are going through an assessment to find these opportunities for synergy and best practices between the two businesses, and to bring more to our customers as quickly as we can. In support of this, we will look to expand the CEI customer advisory board and engage our customers broadly to understand what clients need and value today, and show them paths for the future.
Smolda: We’re delighted this has happened. It’s given us total clarity and visibility for the future. I think CEI is going to have access to resources we never had before, and we can pay attention to what we do best with Fleet Driver Management.
I have to thank Element for allowing CEI to preserve the interests of its customers, both the direct and channel partners, because that was my commitment to our customers for all these years. Element has backed up that personal and professional pledge.