The overall volume of acquisitions may have quieted in the waste industry this year, but the sector’s main publicly traded companies still spent nearly $3 billion on deals through September.
This figure includes spending reported by WM, Republic Services, Waste Connections, GFL Environmental and Casella Waste Systems in the U.S. and Canada. While much of the spending in Q2 was driven by other companies purchasing divested assets from GFL, activity in Q3 included consolidation of various private companies.
Catch up on the details for each company as well as what executives said about potential Q4 and 2024 activity during recent quarterly earnings calls.
|Q3 Acquisition Spend*||2023 Spend*||2023 Annualized Revenue Acquired|
|Republic Services||$20.7M||$948M||Not officially reported|
|Casella Waste Systems||$300.2M||$847.8M||Not officially reported|
*Spending totals are net of cash acquired.
**GFL figures converted from Canadian to U.S. dollars for comparison purposes, based on Nov. 7 exchange rate.
The sector’s largest company is sticking with a more selective approach on M&A, as it has been in recent years. CEO Jim Fish said that “at a time when interest rates are kind of at a multi-decade highs and there's a bit of uncertainty about the economic outlook here” he would rather focus on more predictable investments, such as recycling or renewable natural gas infrastructure.
“So it doesn't mean we're not going to be in the M&A market, we will be. And when we're in that market, we're going to very much focus on strong strategic growth opportunities and tuck-in acquisitions,” he said. “But I just don't want to get into a competition, particularly based on these kind of future forecasts that may or may not become realistic or achievable.”
While Republic has been active this year, including with larger purchases of Canadian company Wasteco and GFL’s Colorado-based assets, it had a quieter Q3. All of the year’s transactions have been in solid waste and recycling, but CEO Jon Vander Ark said the company is “optimistic through the remainder of the year and into the first half of next year that there's a number of attractive opportunities” in the environmental services sector.
Vander Ark said the company is still well positioned for other waste acquisitions, in part because smaller competitors may be motivated to sell in an inflationary environment even as labor strains have started to ease. “So they're starting to get less pressure there as we've seen turnover come down and labor availability go up. It's still elevated versus the historical norm, but it's gotten easier relative to a year ago. The supply chain hasn't and that's certainly becoming constrained,” he said, citing ongoing delays for truck deliveries.
CEO Ron Mittelstaedt said the company continues to see “above-average levels of seller interest.” The company has deals worth another $80 million in annualized revenue “already signed and in some cases awaiting regulatory consents, which are expected to close by year-end or very early in 2024.” Mittelstaedt also said that valuations may have peaked in late 2022 and “M&A is still our best use of capital” on a long-term basis.
GFL acquired 11 businesses during Q3, six of which are focused on solid waste and recycling, as well as four more since the quarter ended. Notable recent deals include the purchase of Canada-based liquid waste company Fielding Environmental and South Carolina-based hauler Capital Waste Services.
CEO Patrick Dovigi said the company has done all of the large platform acquisitions it needs, meaning that going forward “our focus is on smart, accretive, densifying tuck-in acquisitions.” GFL executives disagreed with the opinion from certain investors that M&A should be paused until its debt leverage ratio comes down further.
Instead, Dovigi said he believes this is the right time to pursue opportunities because other companies backed by private equity or infrastructure funds may be more limited “as the banks have tightened up and as the loan market has tightened up.” CFO Luke Pelosi reiterated that regardless of M&A opportunities “leverage is going in one direction, in one direction only, and that’s down.”
The company closed three acquisitions during Q3, including the $219 million purchase of New York-based Twin Bridges Waste & Recycling, and is still focused on integrating the larger summer purchase of GFL’s Mid-Atlantic assets.
Looking ahead, CEO John Casella said the company will be focused on integrating these assets until at least Q1 of next year, but still sees “significant opportunities for us to continue to grow from an M&A standpoint.” The pipeline of possible deals is worth an estimated $900 million in annualized revenue across Casella’s broader footprint. President Ned Coletta said the company is “maintaining significant liquidity and balance sheet flexibility” to support possible spending in this area, among others.