We have years of experience in this industry for the valuation of the business, equipment and real estate. Let us help you with our valuation consultation in all areas of the valuation of solid waste businesses. Below is a brief synopsis of the industry.
Description of Business
Establishments primarily engaged in assembling, breaking up, sorting, and wholesale distribution of scrap and waste materials. This industry includes auto wreckers engaged in dismantling automobiles for scrap.
General Industry Information
Waste Management is a complex industry, one which has had to adopt many environmental regulations since the 1970s. At one point, the United States did not differentiate between discarded materials, allowing all varieties of waste to be transported to local dumps. Environmental concerns specifically air and water contamination concerns prompted significant industry regulation by the EPA. The most significant differentiation was between municipal solid waste and hazardous waste. Distinct management requirements exist for different types of waste.
Due to the various waste disposal methods, specialized waste management firms profited from engaging in these niche trades. Revenues are largely driven by periodic contracts with municipalities, commercial clients, and other types of clients. Collectively, all segments of waste management and remediation services billed approximately $40 Billion during 2008.
Recently many municipalities have opted to privatize their waste management efforts. Businesses engaged in municipal refuse administration gather the waste from curbside locations or collect already filled dumpsters and transport the material to landfills. Technological advances, such as computerized routing equipment and improved sorting machines used by recyclers have positively affected this industry.
A lingering concern over available landfill space has arisen from public unwillingness to permit new landfills. In turn, many municipalities, as well as the federal government, encourage recycling efforts. The role of long-haul transfer stations is expected to increase into the future, as trash will likely be exported to remote locations.
Acquisition activity is expected to continue in the waste management business, however the scope of future mergers is likely to diminish as companies focus on integrating acquired businesses, generating internal growth and reducing various costs.
The landfill and private waste management industry in the United States is comprised of over 10,000 companies with a combined $50 billion in annual revenue. The industry is highly fragmented aside from the largest three companies which account for over half of the industry revenue. Those three companies are Waste Management, Allied Waste Industries and Republic Services.
The major services in the industry are collection, waste treatment and disposal, remediation and recycling. Waste collection accounts for well over half of the industry operations. Smaller companies within the industry will generally specialize in only one of the operations while larger companies are vertically integrated and able to cover all functions.
While most companies in the industry deal only with non-hazardous and solid waste, some will handle liquid and hazardous, low-level radioactive material as well.
Trash and other waste is usually collected from commercial sites using small steel containers that are dumped into collection trucks. Back-end loaded trucks are generally used for waste collection from residential sites.
Red Flags and Risks
In order for there to be any business for landfills there has to be waste. The abundance in waste generated is based on consumer spending and economic activity. If consumers are not spending as much, then less waste is generate as well. Companies will also have to run efficient operations in order to stay profitable. This is much easier for larger companies who can achieve economies of scale as opposed to small companies in the industry.
The industry is also subject to a growing public concern with the environment. Companies as well as individuals could be making a conscious effort to produce less waste and use more recyclable products instead. This goes in hand with any potential environmental regulations or standards put in place by the federal government. The federal government and smaller specialized companies with sophisticated technologies are also handling hazardous and low-level radioactive materials. Other work such as cleaning up oil spills, ground contamination, asbestos and lead paint removal is also done by smaller specialized companies.
Another risk for landfills is the restriction in amount of available locations. Due to zoning restrictions , there are certain areas where landfills can not be located.
Any existing contracts, especially those with municipalities, should be reviewed for terms and expiration. The loss of a contract could be detrimental to revenues. High-priced municipal arrangements frequently account for the majority of revenues in this industry. Waste management firms can suffer serious consequences related to liability for spilled materials, worker injury, worker dehydration, and other serious mishaps. This industry is at risk of fluctuating operational costs, namely gasoline for transit vehicles. The majority of vehicles used in this industry are very large and have poor fuel economy. A rise in fuel prices can eat away at margins. Additionally, waste management plants are energy intensive and rising energy costs also can eat away at margins. Permitting is a significant concern for many waste management facilities. Municipalities often impose restrictions on facilities limiting the amount of waste volume processed. Buyers should investigate the tonnage permits in place, and consider the feasibility of applying for a volume expansion permit. Lastly, buyers will want to examine the on-site equipment for feasibility and reliability. Old equipment is likely to be either obsolete or require considerable amounts of repairs.
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