Waste & Recycling Market Update – October 2023

Heightened Demand for Material Recovery and Recycling Services Drives Waste & Recycling Market M&A Activity

Capstone Partners released its October 2023 Waste & Recycling Market Update, reporting that demand for efficient and environmentally friendly waste management and recycling solutions has elevated amid rising waste volumes in Commercial and Residential markets. Of note, global municipal solid waste is expected to grow to 3.4 billion tons by 2050, according to the World Bank. Sector participants are expected to pursue acquisitions to scale operations to accommodate increased waste volume. In addition, continued pressure from environmental protection groups and the U.S. populous is expected to emphasize the value of recycling facilities and product manufacturing in the near-term.

Merger and acquisition (M&A) activity in the Waste & Recycling sector has sharply declined through year-to-date (YTD) 2023, with 141 transactions announced or completed, compared to 222 in YTD 2022, which was a record year. While deal volume has slowed, sector leaders have pursued target companies with desirable geographic locations and proven cash flows. Increased competition across the Waste & Recycling sector is expected to fuel M&A activity, as companies vie to capture new customers through increased service capabilities. Regional facility consolidations have been particularly attractive for strategics and private equity-backed players. Specifically, firms that offer innovations in recycling techniques and processes have garnered increased attention from companies looking to reduce their overall footprint on the environment. Strategic buyers have maintained interest in the space through YTD, representing nearly half (49.6%) of sector deals. Large strategics have increasingly pursued tuck-in acquisitions, with public companies targeting middle market players to expand their geographical footprint and add service offerings. Increased construction activity across Residential, Commercial, and Infrastructure markets has spurred an elevated need for material recovery and recycling. As a result, material recovery facilities (MRFs) have been prevalent targets in the M&A market through YTD.

Also included in this report:

• Why strategic buyers in the sector have been active in acquiring businesses with established recycling and resale capabilities.
• How sector M&A multiples have fared through YTD compared to the broader Industrials industry.
• A breakdown of GFL Environmental’s (TSX:GFL) recent divestitures in the space, including seller rationale and valuations.

The expert investment banking professionals on Capstone Partners’ Waste & Recycling Team work with leading middle market companies operating in the Waste & Recycling market to advise with their strategic decision-making in order to maximize financial outcomes at every stage of the business lifecycle. Our firm has developed a full suite of corporate finance solutions, including M&A advisory, debt advisory, financial advisory, and equity capital financing to help privately owned businesses and private equity firms address any need, ranging from growth and financial or operational advisement to an ultimate exit transaction. To learn more about the contents of this report, or about the benefits of starting a relationship with our Waste & Recycling Investment Banking Team, contact us.