Mergers and Acquistions Trends for Solid Waste

Marketing M & A Trends for Solid Waste Management by ElizaBeth De Maagd

Mergers and Acquisitions for solid waste management have fortunately been on the rise including several large acquisitions over the past few years including; Wheelabrator, Veolia, IWS, Choice and other large deals. That is a good indicator that the industry is healthier and more profitable for both buyers and sellers. In the general business marketplace, Mergers and Acquisitions have been increasing in 2015.

The M&A 2015 Trends Report from Deloitte reported that “Executives at U.S. private equity firms and corporations expect the robust pace of mergers and acquisitions to extend-or even accelerate-beyond that strong showing in 2015.” There are strong variables that have been positively increasing M & A activity. The interest rates from the Federal Reserve have retained at an historically low percentage, corporations have higher cash flow and relatively low cost of borrowing funds, and key interest rates are not expected to dramatically increase through 2017.

Sterner Consulting has seen a significant increase in questions and inquiries over the past year regarding selling established businesses and for help in determining a value for a business, facility, or permit for succession planning or for estate or tax purposes. This has been the case for solid waste businesses, and also for the scrap metal yards or processors throughout the country. Financing for acquisition projects is available from a select group of lenders who know and understand the waste industry, its markets and business model. About a third of our valuation and proforma modeling projects are for banks, equity funds, or financial institutions in the process of funding or completing an acquisition. We regularly publish guidelines on industry sales multiples categorized by type and size of waste industry business. The business has seen many shifts in volume and type of material managed by the system and we saw some recent numbers that may be of interest to our readers that were published by the NWRA.

Number of Organizations: An estimated 27,000 organizations (private sector companies and public sector governmental plus quasi-governmental organizations) were operating in the industry. More than 55 percent of these entities were in the public sector. Of the remainder, 45 percent were privately held, while only 0.1 percent (by Count – not volume) were publicly traded.

Revenues: The solid waste industry generated an estimated total revenue, net of intra-industry payments, of $43.3 billion. Approximately 76 percent of this amount was generated by the private sector. Excluding the segment of the industry that is primarily engaged in the operation of scrap metal yards and recycling operations, total industry revenue was equal to $39.8 billion.

Waste Quantities: An estimated 544 million tons of solid waste were processed in the U.S. Approximately 370 million (68 percent) tons were landfilled, 29 million tons (5 percent) were incinerated, and 146 million tons (27 percent) were recycled.

The sheer number of (relatively small) companies operating in this industry should fuel continued buying and selling opportunities for waste management companies, routes, landfills, transfer operations, and recycling facilities for a long time to come.

During the past few years, Sterner Consulting has participated in many industry transactions both large and small. We have participated in large consolidation projects all over the US, and we have worked with companies buying and selling single operating routes. We have completed several large analysis and valuation projects for companies planning for inter-generational change, moving the company leadership to the next generation. This year, we have worked with many companies in the Midwest and south central parts of the country that are seeing a resurgence of interest from buyers and consolidation companies seeking to add revenue, routes, and transport networks into their business models.

If you are a buyer or a potential seller of solid waste business assets, permits or projects, call us, we can help you bring that project to market and prepare documentation highlighting the business and the many important, unique and compelling reasons to buy your business or project.

On another topic, we recently noted that a few publications have been highlighting women working in the waste business. We talk with a lot of waste industry owners and managers from all over the country about their businesses, M&A activities, valuations, forecasting. and a wide range of consulting projects. I am constantly amazed at how many women own and operate very successful waste business companies in what is sometimes thought of as a masculine business. We have learned over the years to really appreciate working with those women owners and managers and one reason is; they actually listen and act on advice and internalize and integrate suggestions about business planning, finance topics and other consulting advice.

If you would like more information on our M & A division or our Business Broker division, please feel free to give me a call at 412.562.0891 and ask for Beth. You may also email me at beth@sternerconsulting.com.