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Waste sector M&A activity grows

Merger and acquisition (M&A) activity has reached its highest level since 2011, according to an accountancy firm’s research.

Grant Thornton reported that 15 of 45 deals completed in 2014 were in the final quarter, significantly more than in the same quarter of the previous three years.

The company’s review of last year, An ever changing landscape, said the deals were relatively small in scale, reflecting a need for businesses to consolidate and move up the value chain.

The largest of the year was Interserve’s acquisition of Initial’s facilities management business for £250m, consolidating the company’s position as one of the UK’s largest support services.

The report said Biffa’s acquisition of collection divisions from Shanks and PHS reflected an intention to consolidate leadership in commercial and industrial collection.

The sale of Eco Plastics to Aurelis AG was an example of a distressed deal in the plastics sector which is experiencing difficult conditions such as the fall in oil prices.

Mike Read

The company’s head of waste, Mike Read (left) said: “The UK waste sector is emerging from a period of turbulent change. The market is starting to move to a circular economy, where any material has value – whether that’s monetary or through energy recovery. Building the ability to provide a full service offering is a key driver for M&A in the sector.

“Those businesses doing well are able to efficiently process waste to derive value, and have easy access to innovative technology and high end processing facilities.

“The ones that are struggling tend to be in the mid-market, where business models are more likely to be based on a traditional model of collection services and export out of the UK”.

Read said that without a single approach from councils to waste management, and limited requirement for large, high volume energy from waste facilities, waste is increasingly being dealt with on a local basis.

“This means that technologies such as gasification plants and anaerobic digestion are becoming more accepted as the norm, particularly as they can be expanded on a modular basis. Areas such as this are likely to increasingly catch the eye of investors in the short-term future.”

Waste management deals have seen the most growth of all industry sub-sectors, accounting for 29% of all deals in 2014, up from 12% in 2013.

Newer areas of recycling like glass colour sorting and WEEE had received interest from operators and investors.

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