It takes a strong leader to chart the course of a waste management organization.
At Waste Today’s Corporate Growth Conference, which took place Nov. 18-19 in Chicago, a panel of waste industry executives discussed what the path to success looks like in a session titled, “Kickstarting Your Business: Waste Management Success Stories.” Led by moderator Andy Schwartz, director at Lincoln International LLC, the panel consisted of Laurel Mountain Partners Managing Director Jeff Kendall, Lakeshore Recycling Systems CEO Alan Handley and Veolia North America President and COO Bob Cappadona.
Positioning for prosperity
The economy has continued to see a steady upswing since the Great Recession. While this has created opportunities, it has also required strategic direction to maximize revenues.
Kendall says that upon Laurel Mountain Partners selling its last garbage business in April, it was focused on taking an aggressive approach to the market.
“We're working very hard really pushing price [before we sold],” he says. “We were being very aggressive from a sales standpoint. We were obviously working trying to build a new customer base and spending a lot of time managing our costs, as well. We weren’t really doing anything too special other than just running hard.”
Handley says that Lakeshore, whose business was primarily recycling at the beginning of the decade, has worked over the last several years to diversify its offerings in the wake of China’s National Sword recyclables ban.
“We really are trying to infuse as much automation into our processes as possible,” he says. “We are a heavy MRF-oriented company. We bring in somewhere around 2 million tons of waste from Chicago and the surrounding area a year. We recycle about half of that. We have people working 24 hours a day, seven days a week on the line picking material and harvesting out recyclables and diverting material. So anytime I can displace human input with mechanical input, that's been a big driver for us over the last couple years.”
Handley says he envisions Lakeshore will be able to run a completely automated MRF over the next three to four years, with the exception of needing manual sorters on the presort line. This increase in automation will help the company improve contamination rates and reduce costs.
Additionally, Handley says that despite the strong economy, his company is working to diversity its offerings in the event a recession hits in order to mitigate risk.
“We've been continually developing more and more verticals and diversifying away from just recycling, which was our core business back in '13,” he says. “And now, we're the second largest port-a-potty company in Illinois, we're one of the largest roll-off companies in the Midwest, we have a larger presence in residential and are developing more commercial business and we do street sweeping, too. We have lots of these different revenue streams and EBITA contributors so that if one division falls down, we have other ones that can pick it up. And that's worked out really well for us over the last 18 to 24 months given some of the headwinds we had in the recycling market.”
Handley says that these different verticals allow the company to have a “plan B” on the shelf at all times should one part of the business begin to see some decline.
Cappadona says that Veolia has focused inward on improving the company’s position by trying to recruit the right type of employee who can grow with the organization.
“[Over the last several years], you just didn't have the level of M&A activity and business activity we’re seeing now. … We're in a different period for our business,” he says. “You've got things that you need to do in order to manage your existing team in a different environment. … In the [environmental services sector], we need people who can go out to our customers, operate a computer, communicate with a customer, drive a commercial vehicle, have a chemical awareness, typically have a chemical degree and work outside in the winter. [Our potential recruits have the option to go] work in a mirrored office building somewhere and probably get paid better in the beginning. In our environment, it's a tough hire. We find people who truly enjoy what we do and have an appreciation for what we do.”
Cappadona says that once workers sign on to Veolia, the company aims to promote retention via various mentoring programs and achievement-based promotions and pay raises.
Elaborating on what Lakeshore does to recruit new employees in Chicago’s hypercompetitive job market, Handley says the fact that his company runs a union shop helps provide some stability with techs and drivers. He also says the company’s growth and consolidation in the market have made Lakeshore an attractive option for these professionals who want to work for a stable organization or one that can offer first shift schedules opposed to second or third shift. He says that Lakeshore has also started offering more externships and internships at local colleges and trade schools to attract younger workers who can come in and fill the company’s pipeline.
Considerations with M&A
Pursuing M&A activity has been a steady way for many waste companies to supplement their organic growth, but Cappadona says that operators need to ensure they have the right structure in place when considering making a move.
“I get up at employee meetings and everybody wants to know who we might buy and what are we doing [on the M&A front]. Those things sound great, but you've got to make sure that you've the foundation to support these deals and you've the team climate for it. Otherwise, you could become the next opportunity for somebody else [to acquire],” he says.
Kendall notes that when in the midst of M&A transactions, being able to partner with experienced and savvy private equity partners has been instructive for the waste businesses he’s been involved with.
“The money is critical and the deal structuring [expertise] is critical,” he says. “Oftentimes, we've had what I thought were very advantageous structures to management and we're able to incentivize not only ourselves, but employees. So, having sophisticated private equity partners and support management helps you to put a structure in place where everybody makes out. We've always shared a lot of equity with key employees and it has worked out for all parties.”
Handley says that one of the things he’s learned through the years is that companies should be cautious about who they’re doing business with if an acquired company’s personnel is coming along as part of a deal. Lakeshore now requires those in leadership positions who are staying on during an acquisition to undergo the same psychological testing and team assessment as any other employee to ensure they are a fit with the company’s existing personnel.
Cappadona concluded the session by saying that ultimately, while the opportunity to grow through M&A can be attractive, the prospect of growth shouldn’t be enough to entice business leaders to be overly aggressive in pursuit of the wrong opportunities.
“You have to balance wanting to innovate and not falling in love with the innovation or the deal to be able to make the right business fit decision for your organization,” he says.