The recent stream of acquisition and investment activity by waste companies outside of the traditional MSW stream may be only the beginning.
The majority of disposal assets in this market are managed by a handful of companies, similar to the MSW market, said Noah Kaye, a managing director and senior analyst at Oppenheimer. That concentration and relatively limited capacity may lead these companies — and competitors — to invest in “waste-to-value” options that find other uses for certain streams. Options and strategies may differ for hazardous, nonhazardous, liquid and industrial waste, as well as field and emergency services, but all are currently seeing interest.
This competition around disposal capacity “remains a major moat in the industry,” Kaye said, meaning there may be fewer deals in that area. “As we think about other parts of this environmental services industry that are far more fragmented — like field and industrial services — without a doubt, there will be ongoing consolidation.”
Browns Gibbon Lang & Co., an advisory firm that has worked on many waste deals, recently put out a report about waste-to-value and sustainability as areas of future M&A and investment opportunity. It notes that this market is “seeing strong activity as emphasis on sustainability continues to grow.” Federal regulations around PFAS and other areas may play a role in this activity.
This interest from customers is “leading companies to seek acquisitions that can more rapidly build scale and expand service capabilities into adjacent technologies and waste treatment categories and end markets,” the report said. It cites “significant dry powder” available to both private equity firms and infrastructure funds in the future.
“The nontraditional waste streams — whether it be liquids, hazardous, industrial, nonhazardous — there is massive opportunity to consolidate and also follow a path of waste-to-value and vertically integrated disposal. So we’d say those are in the earlier innings than MSW and C&D,” said Effram Kaplan, managing director and head of BGL’s services and infrastructure verticals.
Future environmental services plans
The waste sector has seen numerous transactions in this area in recent years, including Republic Services acquiring US Ecology and others, Crystal Clean going private through a private equity sale, Heritage Environmental Services selling to EQT Infrastructure and EQT-backed Reworld acquiring multiple companies, among many others.
During a panel at WasteExpo’s investor summit on May 6, many companies said they expect that pace to continue.
Brian Recatto, CEO of Crystal Clean, said acquisitions will be a “large component of what we do now as a private company” and pointed to one in hazardous waste earlier this year.
“We’ll do a lot of acquisitions focused on infrastructure and assets for us in the markets where we’re not currently very strong in [and] don’t have a lot of density,” he said, citing the Western U.S. as an example, while also noting plans for other investments in new and updated facilities.
Selma Kivran, executive vice president and divisional president at Reworld, said the company’s eight deals within the past 18 months were focused on finding options to replace existing disposal practices. Heightened customer attention to compliance and sustainability is driving those efforts.
“We continue to look for opportunities to do that and accelerate and add more to the portfolio,” she said.
Ambipar, an international emergency response company that recently expanded into the U.S., said it plans to take time to absorb a string of prior acquisitions.
Bob Cappadona, CEO of Veolia North America’s environmental solutions division, said the company is primarily focused on completing a hazardous waste incinerator project in Arkansas, but added “I think you’ll see quite a bit of activity from Veolia” in the future.
Republic has done multiple deals in addition to US Ecology, including last year’s purchase of ACTenviro, and the company said it continues to assess other options.
“We’re very surgical. We know what we need to do, where we need to go, the density, the vertical integration, the internalization of waste disposal,” said Rich Kang, Republic’s senior vice president of operations for environmental solutions. Speaking about the company as a whole, Kang said that “we generate a lot of cash that we’ve got to put to use, and we’re always looking at good opportunities, but we’re going to be very, very selective.”
Clean Harbors has also done multiple deals this year and expects to do more.
“We feel there’s great M&A opportunities in both our businesses,” said co-CEO Mike Battles, referring to the company’s environmental services and Safety-Kleen divisions. “I see that opportunity for us … because of our national footprint, because of our network of assets, being able to provide good value to sellers and to our customers.”
Going forward, Kaplan said, the number of “large, scalable opportunities” in the broader waste sector are limited. Instead, he said, “we see huge opportunities at the subscale level” — including in liquid and industrial waste. “There are many businesses and business models that can be developed through properly putting together the collection network and the processing and disposal or value-out-of-waste components.”
Over the next five years, Kaplan expects to see more of these businesses grow, and certain larger ones transacting to prepare for the next phase of that growth. Aggregate deal value in this category may go up, despite transaction volume being steady or down.
The role of inflation and pricing
Companies in waste and environmental services more broadly are also placing a greater emphasis on pricing. Executives from multiple companies said the recent period of inflation, and ongoing demand due to the reshoring of manufacturing, have helped this segment shift the focus from volume to price. These trends are also playing a role in the broader M&A interest.
“Republic integrated US Ecology and grew that business during a period of high inflation in the economy, which gave some cover, but the company was very clear in prioritizing price increases,” said Kaye. “Republic had the balance sheet to be able to remain disciplined around which business it chose and which it could walk away from. And I think that pricing discipline did have a positive ripple effect on Clean Harbors and the entire industry as well.”
During the summit, Kang said Republic felt confident in this pricing approach because the business is “safety-sensitive” with complex material streams. Looking ahead, he said, the sector’s financial potential is “very promising.” Crystal Clean and others said they also benefited from this shift.
“Having new entrants in our space — people like Republic that own solid waste assets, that are very disciplined in their pricing approach — that’s really helped some of the legacy players in the business that didn’t feel like we had that type of pricing power. But we do now because we have scarce assets,” said Recatto.
As these larger companies maintain their focus on pricing, future acquisitions of smaller companies that may not have the same pricing rigor could present further opportunities to boost profits.
“Generally, larger players, where investors are carefully scrutinizing margins, tend to behave in this disciplined way,” said Kaye. “So we certainly believe that further industry consolidation would be positive for profitability and margin profiles for the big players.”
