Mike Read, head of energy and environment, Grant Thornton UK LLP, looks at last year’s M&A deals and asks, what are they telling us about the waste market?
We are reaching that time in late January, which, for me, means the annual dilemma as to when I should stop wishing people a Happy New Year and is also the point where Grant Thornton starts to collate last year’s M&A sector deals for our annual waste review, which will be published in February.
So having had a first look today, what are the key messages? Overall deal numbers are down – the lowest they have been since 2010, albeit the total has not varied significantly over this period. Given the slow start to the year, with only 5 deals done in the first quarter, the likelihood was it would end up being a low total.
Deal values have also been subdued this year, with no disclosed value deals surpassing £60 million in investment. Looking for value seems to have been the focus, which was also evident in the previous rounds of investment in more specialist businesses, particularly recycling. This will please officials in Brussels as the EU rolls out its Circular Economy package.
The largest deal with a disclosed value completed in 2015 was the acquisition of IT recycler RD Trading, by Arrow Electronics, early in the first quarter of the year. The deal, valued at £56m, provides Arrow with the opportunity to expand their value recovery business across Europe.
This year saw consistent activity in the WEEE sector, which accounted for a third of the recycling M&A activity in 2015
Organic waste replaced plastic recycling as the joint leading subsector in terms of deal volumes (along with WEEE at 33%), at the expense of plastics and metals.
There has been greater diversity in terms of recycling deal types in comparison to last year, with activity in glass (not seen last year) as well as an increase in investment in organic waste.
This year saw consistent activity in the WEEE sector, which accounted for a third of the recycling M&A activity in 2015. Organic waste replaced plastic recycling as the joint leading subsector in terms of deal volumes (along with WEEE at 33%), at the expense of plastics and metals.
A notable deal in the organic sector was the £33m equity investment in Agrivert by its existing investors. Concurrent to Tamar’s changing focus in the AD sector away from new developments, this is a statement of intent by Agrivert given we understand the investment will be used to complete the construction of two new AD plants.
This year has been another strong year for financial investors, with a number of deals once again attracting interest from the PE and VC community. Aurelius AG, a listed mid-market pan-European investor based in Germany, has been an active player again in 2015.
Aurelius made two consecutive investments in 2014 in the plastics sector, with the purchase of Eco Plastics and Continuum (Continuum a 50/50 joint venture between Coca Cola and Eco Plastics), as part of a stated strategy to capitalise on the UK’s growing recycling sector. In July 2015 Aurelius announced a further investment in the sector by confirming the acquisition of Regain Polymers, a bespoke compounder and recycler of post-use, rigid plastics.
A fuller analysis will be provided within our annual review but it demonstrates the trend towards more focussed value adding acquisitions and investments. Having said that, these deals will be swamped in size if the much-publicised flotation of Biffa happens as planned later this year.
