Unassociated Document

Set forth below is the response on behalf of Essex Rental Corp. (“Essex”) to the comments of the staff (the “Staff”) of the Securities and Exchange Commission (the “Commission”) contained in the letter, dated September 25, 2009 (the “Comment Letter”), concerning Essex’s Annual Report on Form 10-K (the “Annual Report”) for the fiscal year ended December 31, 2008. In this Comment Response Letter unless the context otherwise requires, the words “we”, “us” and “our” refer to Essex.

Response: A table quantifying the final purchase price allocation is already provided in footnote 1, “Business and Principles of Consolidation” to the financial statements included in the Annual Report. See page F-16 of the Annual Report. Such allocation table will be incorporated into our proposed footnote 1 disclosure in future filings, as revised below, such that the disclosure will read as follows:

 Assets Acquired:
             
        
       
        
 Cash
          $ 1,191,660  
        
 Accounts receivable
            10,701,304  
        
 Other current assets
            4,964,670  
        
 Rental equipment
            256,086,550  
        
 Property and equipment
            8,095,892  
        
 Spare parts inventory
            3,064,029  
        
 Goodwill
            23,895,733  
        
 Other intangible assets
            3,640,000  
        
 Other assets
            2,429,403  
        
         
        
Total Assets Acquired
            314,069,241  
        
         
        
 Liabilities Assumed:
               
        
         
        
 Accounts payable and accrued liabilities
            13,848,973  
        
 Deferred tax liabilities
            74,951,611  
        
Total Liabilities Assumed
            88,800,584  
        
         
        
Net Assets Acquired
          $ 225,268,657

The methodology in allocating the final adjusted purchase price of Holdings of $225.3 million, including related includable transaction expenses, to the Balance Sheet including the assets acquired and liabilities assumed is described below as follows:

The fair value of the Retained Interests accepted by Essex Crane’s officers in lieu of cash was based on the enterprise value for Essex Holdings ascribed by the total purchase price paid in the Essex acquisition. The number of shares of the Company’s common stock into which the Retained Interests could be converted was based on the estimated per share cash in trust as of the acquisition closing date and approximated the common stock price on the acquisition agreement date;

Quantify the significant assumptions you used to negotiate the purchase price and the revised assumptions you used to determine that goodwill was impaired. For example a quantified discussion of the changes in the assumed discount rates, comparable company/transaction multiples, and financial forecasts may help your investors to more fully understand the factors that led to the goodwill impairment.

Response: In future filings with the Commission, we will provide the following proposed disclosure in Management’s Discussion and Analysis and the notes to the Company’s financial statements which discuss the Essex acquisition and resulting Goodwill and Other Intangible Assets:

The purchase price of the Holdings acquisition was negotiated during the fourth quarter of 2007 and the first quarter of 2008 and was agreed upon on March 6, 2008, the date the purchase agreement was signed. The purchase agreement provided for a purchase price of $210 million, subject to adjustment at and after the closing date based on Essex Crane’s working capital at closing and crane purchases and sales by Essex Crane prior to the closing date. The adjusted purchase price, excluding related transaction expenses, as of the closing date was $215.5 million.

The Company based its purchase price negotiations on its estimates of the enterprise value of Holdings, which in turn were based on Holdings’ historical and projected revenue and earnings before interest, taxes, depreciation and amortization (EBITDA), which were provided by the sellers. The Company’s Management and financial advisor determined that the purchase price was fair to the Company from a financial point of view using three methodologies:

For additional information regarding the assumptions used to negotiate the purchase price and the analysis performed by our financial advisor, please see the sections of Essex’s Definitive Proxy Statement, filed with the Commission on October 8, 2008, entitled “THE ACQUISITION PROPOSAL – Background of the Acquisition” (beginning on page 43) and “THE ACQUISITION PROPOSAL – Fairness Opinion” (beginning on Page 49).

The Company’s management continued to believe that the negotiated purchase price was fair as of the October 31, 2008 closing date given the financial results of Holdings through September 30, 2008, which were consistent with the projections evaluated by the Company’s management (and the financial advisor that provided a fairness opinion) when originally analyzing the enterprise value of Holdings and negotiating the purchase price.

As required by applicable accounting guidance, the Company was required to consider various triggering events that could indicate that its fair value had fallen below its book value as of December 31, 2008 which could result in the recognition of an impairment loss. Management determined that the 35.3% decline in its stock price from $6.95 on October 31, 2008, the date of the acquisition, to $4.50 at December 31, 2008 was a triggering event that required further analysis. The decline in stock price resulted in the Company’s market capitalization being less than the book value of equity for the month of December 2008, which management considered an extended period of time. As such, the Company engaged an experienced and qualified third party to assist Management in performing a valuation of goodwill using management’s assumptions discussed below.

The Company, as required by applicable accounting guidance, considered all financial information available through February 2009 in refining its assumptions used to perform the valuation including its declining revenues, gross margin, a declining backlog and other financial information in determining its forecast of future revenues, gross margin, EBITDA and EBIT. These forecast assumptions were significantly worse than those utilized in determining the purchase price in March 2008 (which management also considered appropriate as of the October 31, 2008 acquisition date) due to the rapidly declining economy and the credit crisis during November and December 2008 which continued into the first quarter of 2009 at which time it began negatively effecting our business. In addition to reduced forecast assumptions, there was also a decline in other market based measures, including the EBITDA median multiple of comparable public companies, which were brought on by the rapidly declining economy and credit crisis. A valuation of the Company was prepared for goodwill impairment analysis purposes using the following methodologies:

an analysis of EBITDA multiples calculated using an estimated enterprise value based on financial information for comparable public companies, wherein the advisor used an EBITDA multiplier for seven publicly traded companies that the advisor and Management believed were comparable to Essex.

The average EBITDA estimates for the comparable five year period used in the discounted cash flow valuation for the goodwill impairment evaluation were 14.1% lower than those used for the fairness opinion. Also, the EBITDA multiple derived from the estimated enterprise value of comparable public companies used for the goodwill impairment evaluation decreased approximately 43.7% from the acquisition date value used in the fairness opinion.

Based on the results of the valuation performed and in conjunction with the significant decreases in the metrics used in the valuation, the fair value of the equity of the Company’s single reporting unit was estimated at approximately $49.7 million, compared to book value of equity of approximately $86.9 million. Since the book value of equity exceeded its fair value by more than the amount of the goodwill recorded at December 31, 2008, all of the goodwill was deemed to be impaired resulting in a loss of approximately $23.9 million recognized in the Company’s statement of operations for the year ended December 31, 2008.

Response: In future relevant filings with the Commission, we will provide the following disclosure in Management’s Discussion and Analysis and a footnote to the Company’s financial statements which discusses the acquisition of Essex Crane:

Under the terms of the its initial public offering, the Company’s initial business combination was required to be with a business whose fair market value was at least equal to 80% of the Company’s net assets on the acquisition date. The fairness opinion obtained by the Company’s board of directors in connection with the acquisition included an opinion that the fair market value of Holdings satisfied the “80% test”, based on the maximum net asset value of the Company, which the financial advisor determined to be approximately $155.0 million based on the Company’s book value as of September 30, 2007 of approximately $79.8 million and approximately $75.2 million in contingent capital representing the aggregate exercise price of the Company’s outstanding warrants that would become exercisable following the closing of a business combination, which had not significantly changed as of the acquisition date. The purchase price excluding transaction costs (the fair market value of the acquired company) of $215.5 million was well in excess of $124.0 million (80% of $155.0 million, the maximum value of the acquiring company).

Assets Acquired:

Cash	$	1,191,660
Accounts receivable		10,701,304
Other current assets		4,964,670
Rental equipment		256,086,550
Property and equipment		8,095,892
Spare parts inventory		3,064,029
Goodwill		23,895,733
Other intangible assets		3,640,000
Other assets		2,429,403

Total Assets Acquired		314,069,241

Liabilities Assumed:

Accounts payable and accrued liabilities		13,848,973
Deferred tax liabilities		74,951,611
Total Liabilities Assumed		88,800,584

Net Assets Acquired	$	225,268,657

Sincerely yours,


/s/ Martin A. Kroll
Martin A. Kroll