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Portfolio > Alternative Investments > Private Equity

One Man’s Trash Is Another Man’s PE Investment

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As long as there are people and communities, there will be garbage, and a need to efficiently collect it and safely dispose of it. That is what can make waste management companies attractive investments for private equity investors.

The U.S. waste management industry includes approximately 24,000 companies — many of them single-location establishments and divisions of multi-location firms — with about $90 billion in combined annual revenue, according to Dun & Bradstreet’s First Research. These privately owned companies have often been operating for decades in local markets, earning the trust of families and neighborhoods for generations. They can be considered recession-resilient companies with balance sheets and brand-name recognition that can take startups decades to build.

As mature, income-producing organizations with proven management teams and loyal client bases, small waste management companies typically need a fraction of the capital required of startups to work towards taking their business to the next level. For example, waste management companies that haul solid waste for residents of urban and suburban neighborhoods may only need a capital injection to purchase more advanced vehicles, such as front-end loading trucks, to streamline their operations and reduce costs. They may also simply need money to enhance the equipment at their waste management facilities, or add equipment to process or recycle additional types of waste, such as cardboard and paper.

Since the companies are already well-established in their respective markets and have a history of producing income in all market conditions, these small capital injections can increase cash flow and potentially deliver a return on investment for private equity investors much faster than startups, or even growth-stage companies in other industries.

In addition, some waste management companies that optimize their operations and income with help from private equity investors may grow to the point where they can acquire or integrate other companies. These acquisitions could provide for route consolidations, and savings on fleet costs and workers’ compensation insurance, creating efficiencies that may ultimately increase the long-term return on investment for investors.

Also, since waste management involves far more than just hauling solid waste, companies that focus on disposing of a specialized type of waste, such as hazardous materials, possess expertise that may provide for insulation from competitors, leading to consistency of revenue. In our day and age, scientific breakthroughs are coming at a much faster pace, and this new research, combined with ongoing emphasis on environmental safety and more stringent international, national and state environmental regulations, may cause waste management companies focusing on the disposal of hazardous waste, or even just recycling, to experience an ongoing increase in demand for their services.

Hauling waste may look easy, but the expertise required to do so safely and efficiently, along with the decades-long loyalty of customers who need their waste removed, make the waste management space a difficult one to penetrate for newcomers, especially in local markets — further strengthening the value of waste management companies for private equity investors.

In my previous column, I discussed four criteria for private equity investors to assess mature, income-producing companies that could be good investment targets. Many of the 24,000 establishments that comprise the U.S. waste management industry meet these criteria:

  • Current and Sustainable Yield: Established waste management companies that generate returns, and demonstrate signs that they will continue to do so, have a higher likelihood of delivering long-term distributions.
  • Proven Operating Partners/Management Team: A waste management company is on the right track to meeting its goals for growth, while remaining profitable, if the operating partners or management team that helped it reach its current status are willing to remain with the firm, or keep a minority ownership stake, following any private equity investment.
  • High Barriers to Entry: Waste management is an industry where it’s not easy for new competitors to launch and compete with established players, placing companies in the space at a lower risk of disruption.
  • Recession-Resilient: There has, and always will be, a demand for waste management services, ensuring that companies in the industry possess high potential to remain profitable in all market conditions.

With literally thousands of waste management investment opportunities available to private equity investors, all they have to do is begin the due diligence process on prospective investment targets with the help of an expert in this specialized, and localized, space.

Jeffry Schneider is a strategic advisor of GPB Capital LLC, a New York-based alternative asset management firm focusing on acquiring income-producing private companies. GPB Capital provides its portfolio companies with the strategic planning, managerial insight and capital needed to enable strong businesses to work towards the next level of growth and profitability. Schneider works with GPB Capital’s leadership team to guide and improve the organization’s worldwide marketing and distribution strategies.

Jeffry Schneider is also the CEO of Ascendant Capital LLC, a branch office of Ascendant Alternative Strategies, LLC, member FINRA/SIPC. AAS is the exclusive distribution partner for, and an affiliate of, GPB Capital. Jeffry Schneider is a Registered Representative of AAS.


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