Your browser is no longer supported

For the best possible experience using our website we recommend you upgrade to a newer version or another browser.

Your browser appears to have cookies disabled. For the best experience of MRW, please enable cookies in your browser

We'll assume we have your consent to use cookies, so you won't need to log in each time you visit our site.
Learn more

Waste investment to boost sector acquisitions

A £7bn investment in UK waste treatment facilities will boost mergers and acquisitions as the sector moves towards a circular economy, a new report says.

Exclusive MRW strap

According to a study (see right) by Catalyst Corporate Finance and LRS Consultancy almost £7bn will be invested into waste infrastructure over the next six years which will pull in new entrants to the market, attract foreign buyers, and create consolidation in the sector.

In an exclusive interview with MRW, Catalyst Corporate Finance partner Mark Wilson predicted that around 45 M&A deals in the waste sector were likely this year, with almost half being private equity led.

He added that investors saw the sector as being able to supply yield opportunities that had diminished elsewhere, and that investment from foreign firms was also likely to increase: “In Spain all but one of the main players in waste management are looking to increase their presence in the UK. The Middle East and Asia are other areas where there is interest.”

Retailers and manufacturers were among those that had become keener to invest and partner with the waste sector to help secure their supply chain, according to LRS.

LRS director Dee Moloney, also speaking exclusively to MRW, said: “There are a lot of consumer facing businesses that want to invest in the waste sector. You’ve got companies like Unilever committing to driving out waste. How are they going to do that? They have to figure out how they can deliver it. There will be companies coming together and recyclers coming together.”

Banks have been used to larger long term contracts to give certainty but the industry will have to adjust as these kind of deals finish, and investment capital comes from new sources.

“C&I is a far bigger market than municipal waste but there are no 25 year contracts,” said industry non-executive director Paul Levett. “But if you were looking for investment in a hotel no-one would ask you who was going to be in room 305 in 25 years time.”

More firms will invest in recycling and energy recovery to help secure their resource supply chain, the report says, while consolidation of the sector will increase as independent waste infrastructure developers struggle to secure funding.

Over half of investment in a variety of waste infrastructure over the last five years – more than £3.8 billion – was from the “top five” operators, Veolia, Viridor, Biffa, Sita UK and FCC Environment, according to the study, and it expects this trend to continue.

Most of the estimated £6.8bn to be invested up to 2018 - based on plants in the planning pipeline - will be in energy from waste, especially incineration or gasification, by which time the “the race to build out the UK’s EfW infrastructure will be largely over” as the residual waste capacity gap is bridged, the report states.

As the drive towards a circular economy increases and the pressure to secure waste supply grows, more firms will look to vertically integrate, with deals such as the Spanish packaging firm SAICA’s acquisition of four paper recyclers over in the last 18 months, becoming more prevalent.

The Waste & Resource Management report highlights recent sources of investment capital including corporate investors, government funding, and private equity, which is attracted to the growth potential in areas such as recycling and anaerobic digestion and opportunities for developing specialist and regional businesses.

The report also outlines some of the challenges facing the waste management sector in the coming year. These include a fall in municipal waste volumes and a drop in recyclate prices – with paper down up to 30% and plastics down 20% - due to weaker global demand, as well as delays to infrastructure construction.


Have your say

You must sign in to make a comment

Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.