If you are keen to invest in a new sector that offers both profitability and resilience, then you may wish to strongly consider acquiring a waste management company.
Recent data reveals that the UK’s waste management sector is predicted to reach a value of USD 12.50 billion in 5 years, representing a CAGR of almost 5% between 2024 and 2030. What’s more, the market is forecast to keep expanding, driven by several crucial factors including population growth, an increasing demand for sustainability, and new technological innovations.
In addition, the government has set some ambitious waste management targets to be achieved in the next few years, with the goal being to reach a recycling rate of 70%. Reaching this target will require more investment across various parts of the waste management ‘landscape’ – making it the ideal time to acquire within the sector.
Eager to find out more? Let’s take a closer look at what it means to buy a waste management company, the pros and cons, and how you can go about it.
Pros and cons of investing in waste management
First, let’s shine a spotlight on the benefits and downsides of investing in this sector, to give you a better idea of what you could expect from an acquisition.
The pros
Arguably the biggest advantage of investing in waste management is the resilience of the sector, due to the nature of the services it provides. As a result, it is not necessarily subject to the same kind of market downturns and geopolitical effects that can cause serious problems for other industries.
In short, waste management is one of those core services that will be required no matter what is happening with the economy or the wider world.
Then, too, there is the potential profitability of investing in this sector. Whether you are thinking of acquiring a company that specialises in waste collection and disposal or a business that focuses on handling waste from a specific sector – such as agricultural or construction waste – there is the opportunity to benefit from a potentially robust turnover.
Of course, that’s not all. When your company buys a waste management business you instantly gain access to the operational efficiencies and cost savings that come from having easy access to this kind of service, which are impressive benefits on their own. Your company will also enhance its reputation with its customer base, as there is a growing demand for sustainability and eco-friendly practices among the UK public.
The cons
While the upsides of acquiring a waste management business are numerous and significant, it’s also important to consider the potential downsides.
For one thing, the waste management industry is governed by stringent regulations, which means compliance is a huge issue. Failing to adhere to the regulations can result in significant fines and possibly even legal penalties as well.
There are also various costs to consider. These range from the purchasing and maintenance of specialist equipment through to operational costs, recruitment and labour costs, and, of course, the initial cost of purchasing the business in the first place.
Finally, you need to consider the often-fierce competition in this sector and how you can ensure that your new acquisition continues to generate business while outshining its competitors. It’s important to conduct thorough market research that provides you with a firm foundation of knowledge to draw upon as you embark on an investment in this sector.
Special considerations
When it comes to purchasing a waste management company, it’s vital that you do your homework and consider several key points.
For instance, do the waste management acquisition targets you’re considering offer genuine growth potential? What is the current condition of their specialist equipment or fleet? Are they located in an area with little competition or is the local market saturated with waste management options? Do they have the required licensing and certification and does the company have any previous or existing legal cases regarding improper handling or disposal of waste?
As we’ve already mentioned, compliance is crucial in the waste management sector, so you need to be sure that any business you’re thinking of acquiring has a clean track record and is fully accredited.
You also need to consider how such a business would fit into your own company, especially if you don’t have other waste management firms in your portfolio. Do you have the knowledge, time and resources to manage such a business effectively and ensure its continued profitability?
By taking time to answer these critical questions, you can make an informed decision regarding the suitability – or lack thereof – of investing in this potentially lucrative (and undeniably essential) sector.
How to buy a waste management business
Once you have done your research, if you are still eager to invest in the waste management sector and do your bit to clean up the world then it’s time to find the ideal target.
Here’s how to go about it.
1. Find a target that ticks all the boxes
By this point, you probably have a clear idea of the kind of waste management business you want to invest in – from its unique specialty (industrial, domestic, agricultural etc.) to its fleet size, turnover and location.
Having a clear acquisition profile like this can work wonders for helping you find the specific ‘targets’ that would work best for your company.
Of course, even if you know exactly what you’re looking for, it can still be tricky to find the right fit. That’s why you might want to hire a business broker to aid in your search. Business brokers have access to an extensive network of contacts spanning diverse industries, so they’re well-placed to help you find the best waste management targets for your acquisition.
Once you’ve come up with a few potential candidates, it’s time to narrow it down still further by carefully considering their financial, operational and geographical attributes as well as the proposed price the seller is asking. If you’re concerned about a target’s asking price you could ask your business broker to carry out a valuation on your behalf to deduce whether the price reflects the business’s true market value.
Eventually, you should be able to pinpoint a target – or targets – that tick all the right boxes and represent a viable investment prospect.
2. Negotiating the deal
The next step of the acquisition process is to negotiate the heads of terms agreement, which will outline various key aspects of the proposed deal. This can be a critical part of the acquisition journey, even if nothing is legally binding.
Ideally, you and the seller will be able to work out the framework of the sale and agree on different vital points, such as the deal timeline, a payment structure, warranties and indemnities and more.
Deals can be made or broken during this phase of the M&A process, depending on how transparent and flexible – or not – both parties can be, so it’s important to proceed with care and always ensure effective communication.
Here, again, a business broker can be of great assistance, mediating between you and the seller and helping to streamline and optimise the process.
3. Due diligence is crucial
As you can probably tell by now, due diligence is a critical aspect of buying a waste management business. After all, the sector is diverse, complex, and subject to strict legislation – so you want to make sure the business you’re buying is robust, well-established, fully certified and financially healthy.
Make sure you pore over all the company paperwork, from its formation documents to its regulatory certification, employee and supplier contracts, and information on its physical premises and equipment.
During due diligence, undisclosed issues may potentially come to light, such as bad debts or a pending legal case regarding illegal waste disposal, so it’s important not to rush this stage of the proceedings to ensure you make the right decision.
Once you’re satisfied that the business you’re considering offers a potentially profitable and robust investment proposition, then it’s time for your legal teams to prepare the final contracts and complete the deal!
Acquisitions made simple with Harris Acquire
Keen to embark on your waste management acquisition? If so, then why don’t you give our friendly and experienced team a call and find out how we can help you source the ideal waste management business for your portfolio?
We have years of experience uniting buyers and sellers and overseeing straightforward, stress-free acquisitions. What’s more, you can take advantage of our Acquisition Finder pilot, which includes a 30-day money-back guarantee, so you can embark on your waste management deal with total peace of mind.
To find out more about this comprehensive service, don’t hesitate to give us a ring on 01026 757100 or send an email to Hello@harrisacquire.com and we’ll be in touch!
