Capstone Headwaters released its Q3 Waste & Recycling Mergers and Acquisitions (M&A) Update, reporting that liquid waste service providers have significantly benefited from a rise in consumer spending, steady levels of industrial production, and stringent waste disposal regulatory standards. In addition, sustainable energy use and green initiatives have supported not only liquid waste disposal, but also value-added processing service.

North American Environmental Services (3.3%), Solid Waste (2.3%), Infrastructure & Soil Remediation (2.9%), and Liquid Waste (3.0%) markets are expected to grow at their respective annualized rates until 2023, according to the Environmental Business Journal. Despite a softening global economic outlook, Waste & Recycling companies hold a defensible market position due to stability in waste volumes, increasing municipality and local government privatization of public services, and recurring revenue generation. As a result, the market is largely inelastic to economic downturns and presents a highly attractive stable investment.

With 122 announced or closed mergers and acquisitions (M&A) year-to-date (YTD) 2019 in the Waste & Recycling industry, the sector has already outpaced all of 2018 volume. An influx of private equity (PE) activity is partly attributable to this increase, accounting for 50% of total volume through YTD 2019, compared to ~38% in all of 2018. Significant revenue visibility due to contract-based earnings and stable waste generation by residential and commercial customers allows PE firms to forecast financial performance with a higher degree of confidence. Financial predictability coupled with market fragmentation allows PE sponsors to build platform investments through acquisitions in order to generate robust returns upon exit.

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