Leasing Life - 01/02/2008

Deals of the month - Impact Marcom
LEASINGLIFE EUROPEAN EQUIPMENT LEASING DEALS

In this two-page report, Leasing Life examines the top equipment leasing deals of the past month
Compiled by Brendan Malkin

AUDIO VISUAL EQUIPMENT
Lessor: Syscap
Lessee: Uknown
Manufacturer: Impact Marcom
Deal Value: N/A

Overview: Provision of leased audio visual (AV) facilities to higher education facilities and maybe also the NHS. The deal, described by Impact Marcom as the first of its kind, includes provision to clients of managed services as well as lease finance. As yet no lessee has been signed up, although Julian Philips, managing director of Impact Marcom, said Reading University is likely to be the first, while others are expected to follow once the product marketing campaign takes off in early 2008. AV equipment has been leased in the past, but largely only as part of a bundled offering and never before as part of a managed service.

What is AV: Ranges from high definition video conferencing systems to a whiteboard. Range in value from £500-£200,000.

Leasing of AV: Rather then being a straight financing deal, Syscap and Impact Marcom combined will provide clients with managed services, including asset disposal, supply of hardware, installation services, maintenance and repair. AV depreciates roughly as quickly as IT equipment, although residual value is expected to be around 10 per cent of cost following a three to five-year lease.

Why Syscap? Although Syscap was slightly more expensive than some other lessors who tendered for the AV financing, this did not deter Impact Marcom from selecting the lessor/broker because of its "big public presence" and its "ability to work with us in partnership". In practical terms, a Syscap member of staff will work with Impact Marcom to structure finance deals, while the lessor's IT system will provide automated underwriting and quote systems, Syscap will also manage all the required documentation.

Deal background: AV is experiencing a boom at present, which, according to Philips, is similar to that seen by the PC industry in the mid-1990s. It is also becoming increasingly integrated into IT equipment, giving rise to bundled deal opportunities. Furthermore, Impact Marcom argues that installation of high-tech AV equipment at universities will provide them with a competitive edge. This is particularly important considering universities' efforts to continue attracting overseas students. The timing of the deal also fits with the Government's current practice of budgeting for the public sector over approximately three years (the average lease terms for AV equipment) rather than on an annual basis.

Potential clients: The initial clients are expected to be universities, although the scheme may be marketed also to the NHS. One potential advantage is that lessees in these sectors may be able to claim back 100 per cent of the VAT they are liable for (1 7.5 per cent of value of the deal) in such deals. To do this, however, the deal has to be shown to be a managed service, which may prove tricky when finance is involved. Also, Impact Marcom is currently researching whether such VAT reclaims can be claimed by the NHS and higher education bodies. However, if it works, the rewards for clients are potentially enormous - it could mean they pay less by leasing than if they buy the equipment, according to Philips.