E360S CEO Ardellini ready to make acquisitions "right across North America"
The industry has already been talking about the North American ambitions of one Canadian waste and recycling company this year. Now, Environmental 360 Solutions Inc. (E360S) hopes to be next up to cross the border.
Founded in October, with $100 million in backing from private equity firm Almada Inc. and NHL star Paul Coffey, the brand new venture is "dedicated to becoming North America's leading and most trusted environmental management company." President and CEO Danny Ardellini (second from left) is also well-known in Canada for launching National Waste Services in 2000, which eventually become a leading name before it was purchased by GFL Environmental in 2008.
With $25 million invested so far and its first acquisition announced last month, E360S is projecting rapid growth for the next two years. Coffey's legendary stature in the Edmonton area is said to have already helped their prospects. According to Ardellini, Coffey is "entrenched on a daily basis" and had been fielding calls to negotiate multiple new deals on the morning before this conversation.
The following interview has been edited for brevity, clarity and context.
WASTE DIVE: Why did you leave the industry in 2010, and what was enticing enough to make you want to come back now?
DANNY ARDELLINI: [I] worked at GFL for a couple years doing acquisitions and running all over the place, and in 2010 just kind of got burnt out. There was a raise at GFL and I'd seen a good exit strategy to get out. My kids were young at the time, so I got to spend some great quality years with my kids.
I looked at the industry back in May of this year and saw there's still a lot of mom and pops out there that are looking to be acquired. With the vehicle that we provide, where businesses can roll in some of their equity into our structure, I thought it was a great opportunity to get back in the business and go again. After doing a couple of other investments I realized that, heart to heart, I'm a garbage man.
During a recent interview, GFL CEO Patrick Dovigi told Waste Dive there is "still a significant amount of opportunity" for acquisitions in Canada, and Ardellini feels the same. The E360S plan is to start in Western Canada, move east and then head down into the U.S. Per a recent Globe and Mail article, Ardellini estimates private operators still account for about 25% of service on a revenue basis in North America.
Some smaller companies may be hesitant to sell — especially if it's a family business — and want to find the right time. What are you offering in terms of that equity opportunity that would be different than the traditional acquisition?
ARDELLINI: It goes back to the original Wayne Huizenga days, when he started acquiring. So our first acquisition with Can Pak: Waste Management was there trying to acquire them, GFL was there trying to acquire them. But [Can Pak President Mark Pedersen] is a garbage guy as well and the challenge for Can Pak was his business was growing, but he couldn't keep up with the capital requirements. Because he couldn't get funding from his bank.
Mark wanted to stay in the business, so this gave him a great opportunity to roll some of his equity into E360S and still operate the business. So we help Mark now, get new trucks, provide him a bigger operating line of credit, allow him the flexibility to grow his business.
The Can Pak deal came with nearly 100 employees, more than 35 trucks, two MRFs and an estimated 150,000 weekly customers to serve as a foundation for E360S. Operations now span multiple municipalities from Edmonton down through Calgary.
How else should we think about E360S differentiating itself in the market?
ARDELLINI: [A]nother thing is that we're looking to acquire in strategic markets. So we are looking across the United States, and we have a couple opportunities on the table that we're looking at now to acquire a couple of waste hauling companies and recycling companies in the United States.
A big differentiator to us is we don't want to acquire them and lose the revenue. We want to make sure we acquire them and we grow on what they're building. I'm looking for companies that are in forward momentum, and they just need help to keep moving forward through finances and through some management and some structure.
Are you mainly focusing on contiguous markets in northern states, or could this potentially be anywhere in the U.S.?
ARDELLINI: We'll potentially look anywhere in the U.S. We're probably going to stay in secondary markets to start off, is our goal, but if the right opportunity was there we would look at any state in the U.S. to operate out of for sure.
Should we expect to see you get fully vertically integrated with a landfill at some point?
ARDELLINI: Yeah, we have a few landfills on the table right now we're looking at. We'd be entering the market with a landfill and then we'd probably look at acquiring the hauling companies around it. So we have different opportunities in different marketplaces to look at a landfill.
Are you focusing mainly on traditional MSW or could you also get into, for example, liquid or hazardous waste?
ARDELLINI: We're thinking definitely liquid waste. We're thinking of also looking at tire recycling and electronics recycling as well. So we're thinking very broad. As long as the opportunity presents itself, we're interested in looking at it. As recently as this morning, I had an opportunity with an electronic recycler. His issue was he can't get the capital to expand his business. So he came to look to us to merge in with us so we could supply him the capital to move forward. As you know, the tire and electronic business is an ever-changing landscape.
For a variety of reasons, there are few national players in North American electronics recycling. Ardellini said he views that as a "great market" because of the potential to complement existing diversion offerings, while also having comparatively less competition due to high capital requirements. He said that with Almada's backing, that approach would also translate to any type of recycling project or acquisition, "if it makes sense and we can get a return on our capital investment."
You're starting out with two MRFs and of course have plans to grow. Given what's going on with markets in the near-term, what's your philosophy on how to handle recycling in this environment?
ARDELLINI: With the recycling downturn, it presented us an opportunity. With a lot of the acquisitions that I'm looking at right now, it's because their revenues are not there from the commodities. We're more focused on making sure the customer is paying the right price for the collection and the processing and the commodity rebate would be back to them. Our company philosophy is we're not going to take the risk or the gamble on the commodity rebate.
With Can Pak, we are very fortunate that the first thing we did is we went back to our clients that bring recycling to our MRFs and explained to them that the commodities are not where they were a year ago — or even 11 months ago or 10 months ago — so we needed an increase. We got 100% of the increase. Whereas [Mark Pedersen] didn't have the time to go to these customers and talk to them, because he didn't have the resources behind him to come up with the proper data to explain to the customer what the cost is to process.
We're not landfilling any of our recycling, we're storing it, but then the customer has to pay for it.
Ardellini said mixed paper has been less of a challenge than in some regions of the U.S. and mixed plastics remain "our biggest issue."
ARDELLINI: We're very fortunate that, when we went back to some municipalities for increases, we've also asked them to eliminate #6-7 [plastics] out of their stream, and they've been working with us.
Focusing on organics recycling, activity in the U.S. has mainly been driven by state or local regulation. When I talked to GFL recently, they said a goal is to bring experience from Canada into new U.S. markets. Their opinion is that some other large companies are less interested in losing volumes because of existing landfill gas operations. How does E360S view organics recycling expansion? Can we see it beyond areas with regulatory drivers?
ARDELLINI: I agree with GFL's philosophy. We believe that we can move quicker with organics. I guess it's an opportunity where the Waste Managements of the world can't move this quick in that area, but we look at it as an opportunity to expand our customer base through offering organic programs. We entered the Alberta market, where there is a ban on organics, so we're fortunate enough that we provide that collection already. There's a local mom and pop processor in the Alberta market that we take our organics to right now.
If the opportunity presents itself, we would look at organics facilities as well to acquire or start up.
From the customer standpoint, be it a municipality or a commercial account, what might they find different in working with you than others?
ARDELLINI: We want to be your trusted environmental waste management company.
Do you feel there's a lack of trust in some areas now?
ARDELLINI: We do in some municipalities we've been talking to, and when you read some tenders out there, they're kind of losing faith. [For example] the blue box recycling challenges faced in January where some haulers just automatically started landfilling stuff. Our commitment is to the environment and to be your trusted environmental waste provider.
Going forward, you have big plans to invest as much as $100 million in acquisitions over the next two years. Where do you want to see the company go in that timeframe?
ARDELLINI: My goal is I'd like to be at about $200 million in revenue in the next couple of years. Clipping like a 21% EBITDA and we want to look at strategic acquisitions right across North America.
Would you ever go public, or do you want to try and stay private for a long time?
ARDELLINI: My investors want me to stay private for a long time. So as long as I've got Almada backing me, we will stay private for as long as we can.
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