Buyers and sellers


December 7, 2018

Regardless of the size of the company, merger and acquisition (M&A) activity affects everyone in the solid waste sector. The mid- to large-size companies use M&A to grow their profile, while smaller operators can leverage the appetite of these larger players to sell out if the price and opportunity are right.

This never-ending cycle of buying and selling is inextricably linked to a number of micro- and macro-economic factors that help determine the viability, and success, of a transaction.

At this year’s Capital Markets Conference, a Waste Today event that was held Oct. 17-18 in Chicago, a who’s who of operators in the waste management and environmental services space, as well as financial market participants, came together to talk about the state of activity in the environmental services sector.

The consensus seemed to be that while company valuations have been healthy in 2018, they could be inching closer to a range that might make potential investors think twice about the price of doing business.

Daniel Butturini, a principal with New Jersey-based Sterner Consulting, says that variables such as the type of operation and waste managed, landfill capacity, tonnage handled, and revenue under a long-term contract, among other factors, ultimately play an important role in determining how high the value of a waste company can grow.

But along with questions on where the economy might be headed in the next 12 months, the fallout of the tightening recycling sector is the elephant in the room for those thinking about pursuing opportunities in 2019.

Butturini issued a word of caution during a presentation at the conference about how the state of recycling might affect business in the near-term, saying, “We believe that active recycling operations can be a detraction from the overall value of an integrated solid waste business due to the perception in public and industry media, the frequent stories about the cost of collected and/or processed recyclable material being approved by oversight agencies for landfill or waste-to-energy disposal, the current market constrictions brought on by a dramatic reduction in the longstanding marketplace’s clients, and export pricing and limited destinations.”

Although the impact of recycling on value is still muddy, Butturini says that any major ill effects would most likely be temporary: “This condition will likely improve as the ‘new normal’ works its way through the national and international marketplaces, and as the commodity resale markets stabilize,” he says.

Regardless of outside factors and shifting economic realities, M&A activity has long been the single-biggest influencer on the landscape of the waste sector. As long as there are pieces of the pie to be had, you can be sure there will be companies waiting in the wings to seize the opportunity.

Check out “When the numbers add up," as well as our cover profile of the GFL Environmental and Waste Industries merger (“Coming to America”) to learn more about the biggest M&A transactions of 2018.