A corporate finance expert on the waste sector has rejected suggestions of a wave of consolidation in the industry.
Catalyst partner Mark Wilson (left) told MRW no major acquisitions had taken place for several years despite businesses such as Cory Environmental being on the market.
His comments follow reports that Biffa could be valued at up to £1bn if it floats on the London Stock Exchange (LSE) next year, as reported by the FT. The paper said the move would follow a “wave of consolidation” in the industry, fuelled by new technologies.
Wilson said: “Consolidation tends to suggest large companies buying each other or merging to intensify the concentration level at the top end of the industry, and at the moment that’s not really happening.
“There has been a mismatch between the expectations of value from vendors and the willingness of buyers to pay. There has also been an issue of acquisition finance, which has been constrained in the past although this is now becoming much more accessible.”
Biffa has been consolidating on a small scale in its core area of the commercial and industrial (C&I) market, Wilson added. It acquired Shanks’ C&I division for £9.5m in 2013.
Wilson also doubted the FT valuation for Biffa, saying it was too early to predict at what price the company could float.
Pricing will be based on book put together by financial advisory group Rothschild to establish institutional investor appetite, he said.
“As a rule, market value can be estimated by comparing what other businesses within the sector are priced at, which are of a similar scale and risk profile to Biffa’s, either on the LSE or others around the world. So much of it is market sentiment at the time.”
Sky News reported in May that Rothschild bank was preparing the company for an initial public offering slated for spring 2016.
A Biffa spokesperson told MRW: “The company underwent a financial restructuring in 2012 which saw Angelo Gordon, Avenue and Sankaty becoming major shareholders.
“Since then Biffa has undergone a significant transformation and the shareholders and board believe that it is an appropriate time to review strategic options for the business, including a possible IPO or sale of the business.
“The review is an ongoing process and no final decisions have been taken.”