Capstone Headwaters released its Waste & Recycling Executive Summary, reporting that waste volumes have normalized following a Q2 spike in residential waste and a decline in commercial waste driven by stay-at-home orders. Notably, resurgences in economic activity have increased commercial waste volume, heightening demand for non-residential waste services. Despite increases in waste volume, waste and recycling service providers continue to face operational challenges related to staffing limitations and social distancing requirements.
EBITDA multiples of large public waste & recycling companies have returned to pre-pandemic levels, demonstrating that high quality businesses that have displayed resilience amid the pandemic continue to fetch strong valuations and garner buyer interest. Strategic public buyers, accounting for 27.3% of total 2020 merger and acquisition (M&A) activity, continued to consolidate smaller industry participants to spur inorganic growth and capture a larger market share. Private equity (PE) add-on deals composed 37.8% of 2020 transactions as PE firms continued to utilize tuck-ins to bolster the geographic reach of platform investments. Capstone expects companies to pivot investment towards their recycling segment in order to capture elevated demand as consumer goods companies increasingly use recyclable materials.