2014 saw a strong start to the waste and recycling sector with double the figure of deals completing in the first quarter of the year compared with the same quarter the previous two years. Conclusion of 2014's second quarter revealed steady consistency with the same period across the previous four years. These results support the predictions outlined in Grant Thornton’s annual waste sector review.
Deals in the first half of the year reflect an even spread of the different waste subsectors – with hazardous & industrial, waste management and recycling each accounting for 30% of transactions. Energy from waste makes up the remaining 9% share. Recycling deals are slightly up on the same period last year and analysis shows increased activity in WEEE and plastic recycling – both accounting for 29% of the total.
Mike Read, Head of Waste at Grant Thornton UK LLP, commented: "It's heartening to see that deal activity continues to pick up well in to 2014 mirroring the UK economy's return to strength. The nature of the deals also supports the view that larger players are meeting the demand in a fast changing and increasingly competitive market by seeking out smaller acquisitions to enhance their existing service offering.
"Interestingly, deals in the first half of the year continue the trend for hazardous/industrial and waste management acquisitions with 66% of acquisitions occurring in these sub-sectors of the market. There is evidence that there is significant appetite amongst the major players to consolidate their market share by picking up smaller operators - as purchases by Biffa, Cleansing Service Group and OCS Group have shown."
Other deals in the half include the sale of a number of Augean's hazardous waste assets to Cleansing Service Group and Greenway Environmental in March. In addition Biffa acquired the commercial waste business of PHS - PHS Wastetech - as part of their stated strategy to grow market share within the industrial and commercial waste sector in the UK.
It is also a further indication of waste management services being seen as a core part of a wider facilities management offering, and in the context of municipal activities, the efficiencies it gives FM companies ability to offer a joined up multi-service to local authorities.
Although the overall figures include a number of distressed sales, there does seem to be evidence of a general upturn in appetite for waste acquisitions, continuing the growth trend seen in the latter half of 2013. Notable deals this year include Interserve’s acquisition of Initial’s facilities management business, which at £250m was the largest deal completing so far. Initial Facilities operates as a 'Total Facilities Management' specialist offering a wide range of services including cleaning, energy management and waste management. The acquisition consolidates Interserve's position as one of the largest Support Services businesses in the UK.
Overseas investment continues to remain fairly limited, suggesting the UK economic environment remains difficult. However there has been one acquisition by an overseas firm this year already – National Resource Corporation's (NRC) acquisition of Sureclean. Sureclean is a contractor to the Oil & Gas and Petrochemical sectors (amongst others) and provides a range of industrial cleaning and waste management services to companies operating in these industries. PE backed NRC is a global business, and the acquisition extends their European footprint to the UK as well as broadening their service offerings.