2020: A Solid Year of Mergers and Acquisitions for the Waste Industry

Solid waste and recycling companies completed a series of mergers and acquisitions throughout 2020 despite economic disruptions from COVID-19-related shutdowns.

Following the first wave of uncertainty as COVID hit the United States in Q1, Michael E. Hoffman, Stifel's managing director, told Waste360 readers about the possible economic repurcussions.

“There will be negative consequences to this economy, and companies need to understand what they are buying because some commercial customers may not survive this,” he said. “In some cases, owners of businesses will say they were near the end and are not going to restart, and there are some that possibly wouldn’t have survived anyway. This situation has just accelerated that decision.”

Hoffman added, “it’s also a presidential election year, and while we saw a heightened level of M&A post-tax reform and before COVID-19 when everyone’s business was operating really well, businesses are now playing against the expiration of personal taxes and tax cuts that sunset in 2022, and the democrats have a clear message that they will be raising taxes and rapidly.”

Scott Foster, partner, KPMG LLP, spoke about the evolving situation six months later during the 2020 Waste360 Business Leadership Forum session “Mergers & Acquisitions in Today's Environment." He noted that  “there’s still a really strong macroeconomic environment and a tremendous amount of capital available to buy businesses. And aging demographics in the ownership of companies is also driving sales.” 

While buyers were “somewhat tentative” in Q1 as COVID emerged, companies began to be “more comfortable and understand the various levers they can pull to manage costs — particularly labor costs. And buyers are also understanding this better.” Still, the fragile economic climate made it challenging to properly valuate companies.

 “We’re really digging in on revenue and probably spending more time looking at forecasts and revised budgets instead of historical information,” Foster said. “ We’re trying to understand how revenue is trending month over month; are bad debts a problem? Is something a short term or permanent impact?”

Following the election of Democrat Joe Biden in November, Hoffman noted a “positive” economic outlook and said that mergers and acquisitions should rebound in 2021.

“The economic impact will depend on the pace of change – if it’s too fast and the cost cannot be passed through, profits suffer,” he said.

As 2020 comes to a close, here are the mergers and acquisitions that held the spotlight for Waste360 readers.

Casella Waste Systems

Mergers and acquisitions continued to drive Casella’s growth strategy in 2020. The company reported during its Q3 earnings call the acquisition of nine businesses to date, adding approximately $21 million of annualized revenues.

CFO Ned Coletta commented, “We continue to invest during the quarter and plan capital expenditures at our newly acquired operations to drive operating synergies and integration efforts."

GFL Environmental

Founder and CEO Patrick Dovigi lauded two large acquisitions during the company’s Q3 earnings call, including the $1.2 billion purchase of WCA Waste Corporation. He noted a  “well-defined integration plan which is well underway” allowing GFL to pursue both its “organic and acquisition growth strategy.”

Recycle Track Systems

In October, Recycle Track Systems Inc. (RTS) purchased Industrial Organic PBC (Ambrosia) for an undisclosed amount. Ambrosia is a closed-loop manufacturer that turns food waste into circular products and commodities. The deal accelerated RTS's "commitment to sustainable solutions for waste management." This is the company's third acquisition since its inception in 2015.

"As one of Ambrosia's early partners, we believed in their circularity mission from the start," said RTS CEO Greg Lettieri in a statement. "We are proud to have coordinated more than 120 tons of food waste to be put back into the economy through our partnership and now have an opportunity to change the entire landscape of food waste processing with Ambrosia's innovative foundation."

Republic Services

The Phoenix-based company expects to complete between $850 million and $900 million in acquisitions by the end of the year, up from its original budget of $650 million. During its Q3 2020 earnings call, Republic reported a total of $154 million in acquisitions to date.

“We believe investing our free cash flow in quality acquisitions is the best way to increase long-term shareholder value,” CEO Don Slager said. “We continue to prioritize acquisition opportunities to further strengthen our leading market positions and expand into new markets with attractive growth profiles.”

Waste Harmonics

Global private equity firm Arcapita purchased a controlling interest in Waste Harmonics in February 2020.

CEO Michael Hess provided insight in an interview with Waste360, saying: "It’s probably more of a recapitalization than an acquisition. Back in July 2015, I brought in a private equity (PE) partner, Prospect Partners out of Chicago, a great small- to mid-market PE firm. And the timing just seemed to be right."

He added, "we hired an investment banker and went through that whole process. We have found ourselves with a new private equity partner that is excited about our business and the industry space that we’re in and, from my perspective, one that has some very deep pockets that will allow us to execute on an acquisition and growth strategy that we have over the next five years."

Waste Management

In the biggest industry dealing of the year, Waste Management completed the $4.6 billion acquisition of Advanced Disposal.

CEO Jim Fish commented at WM's Q3 earnings call,  “we have taken to heart lessons learned during this pandemic such that we will emerge a stronger, more differentiated company. We’ve learned that we can operate our business with a lower cost structure, and we are holding on to operating efficiencies and cost savings as our volumes recover. Our customer service digitalization investments are unquestionably the right approach, and we have accelerated these efforts to reap the benefits sooner. With further contributions from the acquisition of Advanced Disposal that closed last week and our progress in transforming the recycling business, we are well-positioned for a strong finish to the year with positive momentum heading into 2021.”

Wastequip

The North American manufacturer of waste handling equipment signed a definitive agreement in February to acquire Consolidated Fabricators Corporation (ConFab), a West Coast waste container manufacturer. 

“ConFab has been one of our top acquisition targets for some time because of the synergies it brings, including the ability to process steel, expand our parts fabrication and add container repair services,” said CEO Marty Bryant in a statement. “We are impressed by the business that Mike Melideo has built over the years in terms of vertical integration, intimate market knowledge, consistent product quality and outstanding customer support. The addition of ConFab to the Wastequip family will help us strengthen our presence in one of the most densely populated markets in the country.”

Waste Pro

Longwood, Fla.-based Waste Pro made a number of acquisitions throughout the year. In March, the company took over services previously provided by Resourceful Environmental Services Inc. of Mississippi.

“We’re excited to come together with a company that is aligned with our core values of caring for our environment and providing excellent service,” said Roland Joyner, vice president of Waste Pro’s Southern Region, in a statement. “RES has built a reputation for excellent service in the Mississippi Delta, and we look forward to continuing that.”

In July, Waste Pro expanded its reach in Florida with the purchase of Angie’s Disposal Service, Inc., based in Citrus County, Fla. Angie's Disposal previously serviced approximately 4,500 customers in the area for the past four years. 

“When we met the folks at Angie’s, we immediately realized they ran a like-minded business in that caring for our environment and providing excellent service are top priorities,” said Senior Vice President Keith Banasiak. “They’ve built an excellent reputation for being the best, and we look forward to continuing that. 

Waste Pro also added more footprints in Atlanta with the purchase of AmeriSouth Recycling’s business.

“This allows us to be a full-service company for all the recycling needs of industrial businesses in the Atlanta market,” said Waste Pro’s vice president of Recycling, Will Howard, in a statement. “Our MRF can take any recyclable materials companies may have – baled or loose, delivered or picked up. We can do it all.”

Wheelabrator

In December, U.K.-based waste-to-energy company Wheelabrator announced that it has entered into an agreement to sell WTI / EFW Holdings (“Wheelabrator U.K.”) to the European Diversified Infrastructure Fund III SCSp (“EDIF III”), an infrastructure fund managed by First Sentier Investors (“FSI”).

“I am incredibly proud of the U.K. team and what we have achieved as One Team to grow the Wheelabrator U.K. business over the last 11 years," said Robert Boucher, president and CEO, in a statement. " I look forward to the business continuing to execute on their strategy for continued development of critical waste infrastructure in the U.K. with their new shareholder and partner."

The transaction is expected to be complete in early 2021.