With idiosyncratic risks out of the way, private equity players and infrastructure funds, saddled with record dry powder, and strategics with deep pockets are coming back to the market for waste and environmental services, dealmakers said at a conference.

Business activity is expected to revive with the new Trump administration, leading to more waste generation. This coupled with falling interest rates is expected to revive business sentiment for an industry with stable and recurring cash flow, and high barriers to entry.

“Waste and environmental services would continue to be a pretty bright spot next year,” said an investment banker tracking the sector at the Waste Today’s Corporate Growth Conference 2024 in Chicago.

Public companies, which have been valued at near 17x-18x EBITDA, are acquiring smaller firms. “So these strategics can buy somebody at 12 times, and that would become accretive for them,” said a Detroit-based banker which provides leverage on M&A deals.

In February 2024, Clean Harbors [NYSE:CLH] acquired HEPACO from Gryphon Investors in a transaction valued at USD 400m. EnviroServe, a portfolio company of One Rock Capital Partners, announced its acquisition of CG Environmental, a full-service environmental and industrial services provider, in May 2024.

Private equity firms and infrastructure funds have been snapping up assets in the space. For example, Coalesce Capital, a New York-based private equity firm, announced in September that it acquired Miller Environmental Group, a Calverton-based provider of essential waste, industrial, and environmental services. In February 2023, BlackRock acquired a majority stake in Environmental 360 Solutions (E360S), a Canada-based waste management services company, after buying Vanguard Renewables in 2022.

Capstone Partners noted in an August 2024 report that waste and recycling M&A had fallen 12.3% year-over-year (YOY) to 121 deals announced or completed year to date.

Regulatory scrutiny 

The election provides some hope for a shift in regulatory approach, especially concerning the waste services, where there has been increased scrutiny. There’s optimism that the new administration may ease up on regulation, market participants said.

Easing rules are likely to further boost stock prices of strategics, prompting them to come on the table and make accretive deal trades, they added.

Trump is likely to unwind Biden-era policies, such as IJA, IRA, and CHIPS acts, in favor of his own. The shift in administration may cause funding for some federal initiatives, like addressing chemical contaminants, like PFAS (per- and polyfluoroalkyl substances, or more commonly known as forever chemicals) to be pulled back, along with renewable energy and gas projects, said a New York-based banker working for private funds group.

This is important because waste companies often have to manage land that has a lot of PFAS contamination, since PFAS contaminants are in a lot of products that are thrown out, the advisor said.

PFAS remains a hot topic, but the EPA has been reluctant to take a firm stance, passing the responsibility to other agencies. The focus may shift more toward local and state levels, with states like Maine already acting, such as banning the land application of biosolids to address PFAS contamination, the advisor added.