Over the last four years, recycling has been one of the most dynamic verticals in terms of M&A transactions. It is no longer enough to simply recycle; now it is necessary to find another life for the waste and reincorporate it into the value chain.
Waste treatment (sorting, recovery and final management) is an increasingly attractive activity in the eyes of investors for various reasons that highlight the value and relevance of this sector. We outline the complexity of waste treatment, which is why many industries still do not have an efficient solution for the waste generated in their processes, or if they do, it comes with very high costs. Another determining factor is the concern to treat, recycle or reuse these fractions both for environmental reasons and for the possibility of recovering raw materials that are key in certain production processes and that could reduce costs in certain industries if reused. All these factors are reinforced by the tightening of regulations governing the generation of waste, an action that is increasingly controlled by the European Union.
The sum of all these principles arouses the interest of both private equity funds, which are seeking to diversify their portfolios and value the sector in view of these trends that promote its growth, and industrial groups eager to offer broader waste management services. In the case of large groups already specialized in waste treatment, such as Valoriza or Veolia, an acquisition would favor sector consolidation in the face of the atomization that dominates the market. Another justification could be the search for size (turnover, infrastructure through new recycling plants, etc.) through inorganic growth. Several players stand out in both fields: on the financial side, EQT, KKR, Macquarie, Ancala or specialized funds such as Energy Capital Partners have recurrently participated in operations within this sector. On the industrial side, FCC and Urbaser have been involved in several acquisitions in recent years.
According to Moody’s deal database, there were more than 700 international M&A deals involving waste management and treatment service providers in 2022. The multiples agreed vary depending on the margins that the treatment of each type of waste could provide. According to existing public information, the highest multiples tend to coincide with urban waste treatment companies. Next would be the companies in charge of industrial waste treatment, depending on the synergies they could offer to the investor. Finally, we would find those that provide collection, transport and maintenance services for public spaces, where labor is more intensive and margins are much narrower.
The purchase of Urbaser by the American fund Platinum was one of the most talked-about purchases in 2021 within waste management. The fund acquired the Madrid-based services company from Tianying for €3.45 billion. In 2022, one of the outstanding transactions was the sale of Biffa, the UK’s leading waste management company. The French group Societe Generale, on the selling side, and Energy Capital Partners as buyer signed the deal for an enterprise value of €2.27 billion.
In Spain, Urbaser divested its stake in the Castellon-based Reciclados Palancia Belcaire, transferring its percentage to the Mosaic group, controlled by the Simetría group and the Valencian fund Atitlan. For its part, Repsol became a strategic shareholder of the waste management and recovery company Acteco with the acquisition of a minority stake of 27%. In addition, the company Gestán Conteco, the largest private company in Galicia specialized in the management and transportation of industrial waste, mainly from construction and demolition, is the result of the merger of the two companies, which since the end of 2019 operate together and lead that segment of activity.
