Mergers and acquisition deal volumes among waste firms – a sector which is well-represented in the West Midlands – fell by more than 50 per cent in the last quarter.
According to Grant Thornton UK’s latest quarterly update on buyout activity in the UK waste industry, deal volumes in the third quarter of 2009 declined to only five deals when compared with the volumes seen in each of the first two quarters of 2009 – 13 transactions in the first quarter and 11 deals in the second quarter.
Additionally, deal volumes in the last quarter were down by 64 per cent compared with those that took place in the same three months of 2008, when 14 transactions took place.
But Samuel Hunter, associate director in the Midlands Corporate Finance team at Grant Thornton, said the sector was still seeing some activity and highlighted potential in the organic waste sector.
He said: “Further to advising on the sale of All Metal Recovery to Sims Metal Management earlier in the year, we continue to see interest in the waste sector across the Midlands.
“Although deal activity has dipped in the third quarter of 2009, transaction volumes remain on track to at least equal the 39 deals that completed in 2008, highlighting the significant opportunities that continue in the waste sector for those with access to funding in the current market.
“Hazardous and industrial waste remains an area of interest, with M&A deal activity in this area increasing since 2008, but one to watch is organic waste, with growth being driven by legislative changes and attractive financial incentives.”
Despite the fall in deal volumes, 2009 saw a higher proportion of disclosed deals in the sub-£10 million value range, with all disclosed deals in the first and third quarters in this region.
The highest disclosed deal value to date has been £27.5 million, compared with the significantly higher £1.2 billion in 2008.
In the third quarter of 2009 consolidation in the recycling sector continued to drive acquisition activity, with this sub-sector accounting for 80 per cent of deals. The remaining 20 per cent was driven by hazardous and industrial waste transactions.
Until September 2009 recycling deals led the charge of M&A activity at 46 per cent, followed by hazardous and industrial waste (28 per cent) and waste-to-energy transactions (10 per cent).
The number of organic and plastic waste recycling deals increased against the previous year, overtaking WEEE (Waste Electrical and Electronic Equipment) and metal as the most sought-after material types.