Acquisition spending continues to remain elevated for the industry’s major publicly traded waste and recycling companies, with executives previewing more to come in the months ahead.
Here’s a breakdown of their recent spending and details on their 2022 strategies that were discussed during third-quarter earnings calls. Spending totals include deals in the U.S. and Canada.
|Q3 Acquisition Spend*||2022 Spend*||2022 Annualized Revenue Acquired|
|Republic Services||$66.6M||$2.583B||Not reported|
|Casella Waste Systems||$17.71M||$73.96M||$48M|
*Spending totals are net of cash acquired.
**GFL figures converted from Canadian to U.S. dollars for comparison purposes, based on Nov. 4 exchange rate.
The industry’s largest company ramped up its spending during the quarter, following an extended period of integrating the 2020 Advanced Disposal Services transaction. Notable deals included the purchases of sizable local haulers in Indiana and Arizona. CEO Jim Fish said this puts the company “well on our way to our full-year expectation of $300 million to $400 million” in acquisition spending. That includes the pending acquisition of plastic recycler Avangard Innovative, which is expected to close during the fourth quarter.
Republic’s spending is outsized versus its peers, due the $2.2 billion US Ecology hazardous waste transaction that closed in the spring, but the company has also been active on solid waste and recycling deals. Transactions that closed during the third quarter included a pair of local companies in Colorado and a longstanding hauler in Illinois. CEO Jon Vander Ark said “our robust acquisition pipeline continues to support outsized levels of activity over the coming years” and mentioned that multiple deals are set to close by early 2023.
The company called out an active year of deals, with many more opportunities ahead and transactions worth another $35 million in annualized revenue under definitive agreement. In its earnings release, Waste Connections highlighted that this year’s transactions include “multi-market solid waste franchises” in Oregon and California (where the company has done multiple deals), along with transactions in Arizona, Texas, Pennsylvania and Massachusetts. And in Canada, in British Columbia and Quebec.
CEO Worthing Jackman said the company is seeing “above average levels of interest from high-quality private company sellers, including some unique opportunities to expand our portfolio of West Coast exclusive markets” and noted that the company recently raised $1.55 billion in debt offerings to be prepared. He said it’s possible $200 million in acquired revenue could come from that region by the end of the year as multi-decade conversations with potential sellers start coming to fruition. “It seems like every decade or so is a wave of West Coast sellers, it's kind of generational shifts in whether to retain or sell a business. And the dialogue is quite strong,” he said.
The Canada-based company’s only sizable acquisition of the year has been Texas-based Sprint Waste Services, but it has still been active on smaller tuck-in deals. Transactions completed during the third quarter included deals in Indiana and North Carolina, among other areas. CEO Patrick Dovigi said “the pipeline continues to be very robust,” though future transactions will likely still be on the smaller end.
“Do we have anything in our pipeline today that is a multibillion-dollar acquisition? No,” said Chief Financial Officer Luke Pelosi. He added that “the vast majority” of upcoming deals with be tuck-ins that densify the company’s existing footprint, but if the right, larger opportunity came along then GFL would consider it.
The Northeast company has closed dozens of deals in the last five years, amid an ongoing period of growth, and reported closing 13 deals to date in 2022. Transactions spanned multiple states where it has existing footprints. Casella recently said it had deals pending worth an estimated $30 million in annualized revenue and still sees a broader $500 million worth of opportunities in the area. If the economy declines, the company believes it could potentially elevate activity.
“Depending upon what happens from a recession standpoint multiples could contract a little bit, in terms of from a competitive standpoint, which could be a positive actually, sitting where we are with the capability that we have in the balance sheet. So we look at it really positively, the opportunities are really significant,” said CEO John Casella.