Macquarie Infrastructure and Real Assets (MIRA), the New York-based division of Macquarie Asset Management, has been a leading infrastructure and real asset investment and management company for nearly a quarter-century. While MIRA started out investing in global infrastructure assets like toll roads, bridges, airports, and water and power utilities, the company made the strategic decision to turn its attention to the global waste sector in the early 2000s.
Today, MIRA-managed funds own companies that provide municipal solid waste (MSW) and construction and demolition (C&D) collection, transfer, treatment, recycling and disposal, as well as waste-to-energy (WTE), both in the U.S. and abroad.
To help identify, acquire and then manage waste infrastructure investments in this new segment, MIRA tabbed long-time industry veteran Paul Mitchener. Mitchener, who currently serves as senior vice president and managing director at MIRA, became a part of the company’s U.S. operations in 2005 after 25 years working in Europe, Asia and the Americas for companies like Hong Kong-based Swire Pacific, Houston-based Browning–Ferris Industries, and Paris-based Suez Environment and its waste arm, SITA.
According to Mitchener, MIRA originally made the strategic decision to enter the waste sector because of its complementary nature to the industries the company was familiar with.
“In the early 2000s, MIRA identified that certain parts of the solid waste management business—particularly vertically integrated businesses with disposal assets, such as landfills and waste-to-energy facilities—have very similar characteristics to many of its other infrastructure businesses,” Mitchener says. “The waste business provides an essential service to customers, with volumes that correlate to population and gross domestic product (GDP) growth. These disposal assets are often capital- intensive, with long-dated useful lives.
“More specifically, we like the essential service characteristics of these businesses that generate stable performance and predictable cash flows,” Mitchener adds. “We also like that these businesses are highly regulated and have significant ongoing capital requirements that create barriers to entry. The vertically integrated business model, from collection to disposal, can create lasting competitive advantages, which are attractive to an infrastructure investor. A high degree of fragmentation still exists in the waste industry, which continues to create opportunities for accretive growth and synergies via tuck-in acquisitions. More recently, the use of technology and the investment that goes along with it has increased sophistication in the industry, which, in turn, is resulting in increased efficiency. As a long-term investor, this is a particularly attractive opportunity for us.”
The majority of MIRA’s solid waste investments to date have been in North America through its Macquarie Infrastructure Partners (MIP) series of funds. Since 2007, this represents more than $2.4 billion of equity invested and encompasses some of the largest companies occupying the space.
Some of MIRA’s current and former waste investments in North America include Waste Industries (divested in 2017) in its MIP I fund, WCA Waste in MIP II, GFL Environmental (divested in 2018) in MIP III and, more recently, Wheelabrator Technologies and Tunnel Hill Partners in MIP IV.
Beyond its North American activity, MIRA has also invested in waste assets in China, Korea, the United Kingdom and Germany during this period, and Mitchener says the company is actively looking for additional investments in other parts of the world, including South America and Australia.
New in the Northeast
MIRA made news earlier this year with its acquisitions of Portsmouth, New Hampshire-based WTE company Wheelabrator and Tunnel Hill Partners, the largest waste-by-rail company in the U.S, which is based in Stamford, Connecticut. According to Mitchener, the acquisitions will jointly allow for improved waste processing capacity in the Northeast U.S.
“Wheelabrator and Tunnel Hill are complementary businesses that are both focused on the Northeast U.S. waste market,” Mitchener says. “The Northeast is one of the most densely populated regions in the U.S. and has a greater GDP per capita than the national average, leading to consistent and diverse waste generation.
“Combined with this, legacy waste disposal capacity in the Northeast is declining, which means that the long-term disposal options for the Northeast will be WTE facilities and waste-by-rail. ... Not all waste is suitable for disposal in a WTE plant. Tunnel Hill possesses a unique set of solid waste management assets via its network of rail-served transfer stations, recycling plants and landfills. Tunnel Hill uses this network of assets to dispose of waste in the Northeast, including C&D waste. We believe that the combination of Wheelabrator and Tunnel Hill, therefore, should provide a long-term solution for MSW and C&D disposal, particularly in the Northeast, for decades to come.”
Mitchener says MIRA’s history of successful investments in the waste space have been predicated on proper due diligence during the analysis phase.
“There are two key items that we look for in an acquisition: First, we want to partner with good, honest and hardworking management teams and employees,” Mitchener says. “This is critically important to ensure our investments are successful. Fortunately for us, we have been able to find those people in all of the businesses we have invested in to date, and I am very pleased to say that the people in Tunnel Hill and Wheelabrator are proving to be the same. Together with this, we look for high-quality assets [that] are environmentally and socially sound with strong underlying fundamentals in the regions or markets where these companies operate.”
By focusing on investing in quality people, Mitchener says MIRA has been able to strike partnerships with businesses that foster successful and safe company cultures.
“Our people are our most important assets,” Mitchener continues. “They are what really drive our businesses, and protecting their health and safety is absolutely key to us and is part of our MIRA culture. Safety is the first thing we look at when evaluating companies and the first thing we prioritize post-close. It is the first subject we discuss at any management or board meeting, and it is a key performance indicator (KPI) for all of our people, including the MIRA asset managers who provide oversight for the investment. Over time, our efforts have resulted in considerable improvement in the safety metrics of our portfolio companies and improved the quality of the lives of our people, which is something I am particularly proud of over my nearly 40-year career.”
"In the early 2000s, MIRA identified that certain parts of the solid waste management business have very similar characteristics to many of its other infrastructure businesses.” –Paul Mitchener, senior vp and managing director, MIRA
Mitchener says the company’s track record and reputation have been instrumental in helping MIRA in its ongoing pursuit of investment opportunities in the North American solid waste sector. Through its in-depth knowledge of the market and close business ties, Mitchener says MIRA has been well-positioned to capitalize on opportunities when they materialize.
“MIRA has a successful track record of investing in the industry, and we believe we have been a good partner to the companies that we have invested in and the communities in which these companies operate,” Mitchener says. “This helps in sourcing opportunities going forward. We’ve also developed relationships with many owners and management teams of other waste businesses. These relationships help us identify potential acquisition opportunities at an early stage and allow us to secure opportunities for our funds at the appropriate time.
“We leverage our years of experience and expertise developed from past waste investments to analyze new opportunities. We know what items to zero-in on and what questions to ask as we conduct our due diligence. We also leverage third-party advisors in engineering, IT, human resources, etc. to ensure that we have the full picture of the assets and companies we’re investing in.”
Although a lot of legwork goes into every deal MIRA does prior to striking an agreement, Mitchener says the company’s successful investments have been predicated on putting effective transition plans in place to maximize a company’s potential post-close.
“We develop detailed transition plans for the companies we invest in to ensure that they adopt the best practices and pursue the key initiatives necessary to drive improved operational and financial performance,” Mitchener says. “We also focus on opportunities to improve performance across other areas, such as health and safety and sustainability. After acquisition, we then actively partner with our management teams to build and grow these companies to ensure we’re delivering the best outcomes for both our investors and the communities we operate in.”
A global perspective
In an era where merger and acquisition (M&A) activity is constantly reshaping the North American waste landscape, Mitchener says the future is bright for MIRA. Beyond the traditional markets and segments the company has invested in, he says MIRA is presently looking at adjacent businesses, such as specialty waste, to grow its footprint.
“The solid waste industry in North America is continuing to grow, as it always has. While the largest companies control a significant percentage of the market, the industry remains highly fragmented at the smaller end of the spectrum. From this, we continue to see many attractive potential acquisition opportunities,” Mitchener says. “In terms of other trends, recycling continues to be on people’s minds. The recycling sector remains challenged, as it has been for some time, but it is key to creating a more sustainable future and we will continue to invest in it, where appropriate.
“Additionally, automation and the use of technology to improve data management and analytics are areas we continue to focus on. We will invest in systems that are proven, reliable and that don’t distract our workforce from being safe while they are at work, which is our primary responsibility as an employer in this industry.”
As MIRA continues to search for avenues for North American investment, Mitchener says the company has looked outward to leverage its global perspective as a way to spur future growth.
“MIRA’s global platform allows us to incorporate best practices from overseas waste investments into our North American companies. For example, technology is advancing and service requirements are becoming more comprehensive in other countries, particularly in Europe. We believe investing in companies in these markets has, and will continue to, help us drive change for the better in our investments in North America,” Mitchener says.