New GFL portfolio:
98 collection operations, 59 transfer stations, 29 MRFs, 10 organics facilities, 47 landfills and more than 9,000 employees.
North American footprint:
20 U.S. states and every Canadian province except Prince Edward Island
GFL has previewed further solid and liquid waste expansion in existing states, following its successful Canadian growth model, and is now in the upper echelon of major North American service providers. A potential IPO has also not been ruled out for the future.
GFL Environmental has garnered plenty of attention in Canada during its 10-plus year run, but the young company hasn't seemed to break through among a U.S. audience thus far — the 2018 WasteExpo Investor Summit saw CEO Patrick Dovigi speaking to a half-full crowd at 8 a.m. But after the year it's had, everyone will be paying attention.
Following the purchase of Waste Industries and a smaller liquid waste company — in what so far has been the industry's biggest deal of the year — GFL has suddenly gained a foothold in 20 states after previously only operating in Michigan.
"It was a transformational acquisition that really moved us into new geographies," CEO Patrick Dovigi told Waste Dive in an October interview.
"[We] think the market was right for another new entrant, given the amount of disposal capacity that the big four control. We thought there was a nice hole for us to come in behind and tuck in and dig out our small pieces where we saw fit."
Dovigi said the $2.825 billion transaction was especially synergistic because GFL and Waste Industries had both shared backing from HPS Investment Partners and Macquarie Infrastructure Partners in the past. As a result, GFL actually upgraded its back-end system to follow Waste Industries' model, with their respective IT teams working closely together. That, plus the fact that Dovigi and the founding Poole family share similar cultural values, made it appealing for both sides.
This bold push, combined with the less flashy but still notable purchase of liquid waste company Future Environmental, follows a pattern Dovigi said has served him well in Canada. Similar to GFL's acquisition of National Waste Services in 2008, or its underdog bid to win the first privatized waste contract in Toronto in 2012, or its 2015 purchase of Canadian company Matrec, this latest move jumped it ahead of the pack.
2018 Company Timeline
Plans for an estimated $1B IPO in the spring face new skepticism from ratings agencies
GFL announces a $5.125B recapitalization, backed by BC Partners and Ontario Teachers' Pension Plan, to stay private
GFL announces plans to acquire Waste Industries for $2.825B, along with Future Environmental, expanding U.S. footprint to nearly 20 states.
Aside from maintaining a more decentralized customer service approach, GFL also plans to differentiate itself from national U.S. players in other ways. This means building off experience in Canada by expanding recycling "with the right cost structure" as well as taking a serious look at organics.
"Us being the largest organics processor in Canada, we think that will yield great results as we selectively diversify our service offerings to a lot of these markets," said Dovigi, who feels some companies have been less focused on this because organic waste can be profitable for gas generation at their landfills. "I think a lot of the bigger companies are strategically trying to lobby against that, but I think we see it coming ... It's not a question of if, it's a question of when."
Asked about future U.S. expansion, Dovigi said he hopes to establish a similar approach to Canada, "where this just becomes like a factory" and growth is self-perpetuating. For now, he says GFL is waiting for that "next wave" and will be ready when the time is right. The same goes for a potential IPO, something the company had been flirting with off-and-on before canceling plans earlier this year.
"[For] now, we're well capitalized, we have a significant amount of equity dollars sitting on the sidelines to continue our M&A program and we have very good support of bond and debt holders of our company, that have continued to support us for the last 10 years. As long as that dynamic continues, I think we'll keep marching on the path that we're on, and we'll pick the most opportune time to focus on an IPO."