GFL Environmental made waves Oct. 10 when the Toronto-based waste management company announced it would be merging with Raleigh, North Carolina-based Waste Industries. The completed merger, which was announced Nov. 15 with Waste Industries holding a total enterprise value of $2.825 billion, was celebrated by the participants as the creation of the largest private environmental services company in North America, encompassing operations in all Canadian provinces (except Prince Edward Island) and 20 states in the U.S.
The combined company will operate 98 collection operations, 59 transfer stations, 29 material recovery facilities (MRFs), 10 organics facilities and 47 landfills with a total staff of more than 9,000. Together, the company will service four million residential solid waste customers and 135,000 commercial and industrial solid waste customers.
While GFL has been a significant player in Canada’s waste management sector since 2007, the move marks the company’s first widespread entry into the U.S. market.
“Waste Industries will more than double GFL’s current footprint of operations in North America, adding collection, transfer station, materials recovery and landfill operations in fast-growing United States markets (including North Carolina, South Carolina, Georgia, Colorado, Tennessee, Virginia and others), growing our customer base and forming an extended platform from which GFL can continue to execute on our proven organic and acquisition growth strategy,” GFL founder and CEO Patrick Dovigi, who will continue as president and CEO of the combined company, said in a statement at the time of the deal. “Waste Industries strongly complements GFL’s brand with an over 47-year history of providing excellent customer service to its local communities and has a management team with a proven track record of harnessing technology, processes and systems to drive operating efficiencies. We are excited to welcome the management team and the more than 2,850 employees of Waste Industries to the GFL family.”
According to Dovigi, although the announcement of the merger was sudden, the blockbuster deal has been a long time in the making.
“Waste Industries will more than double GFL’s current footprint of operations in North America, adding collection, transfer station, materials recovery and landfill operations in fast-growing U.S. markets.” -Patrick Dovigi
“We’ve known the Waste Industries team dating back to 2015 thanks to common ownership between the two companies back with Macquarie [Infrastructure Partners] being the biggest shareholder of GFL and of Waste Industries,” Dovigi tells Waste Today. “And back in 2015 and 2016, we got to spend a lot of time with the Waste Industries management team looking at and replicating some of their systems and back office functions as we were building out our infrastructure.”
Dovigi says the common shareholder dynamic between the two companies and the relationships formed over this period were instrumental in laying the groundwork for the merger.
“It was just an easy fit and easy transition, and I think the timing was right for both companies,” Dovigi says.
Leading up to the merger, the companies worked to get to know each other’s businesses and consolidate IT, treasury, health and safety, legal and other back office processes to streamline operations.
During this time, the company also worked to establish its executive team.
“M&A has obviously been a large part of what we’ve done over the last 11 years, and I don’t think that’ll change. ... For us, it’s No. 1 about if the acquisition fits in culturally with what GFL stands for.” -Patrick Dovigi
Among the most prominent moves beyond Dovigi’s appointment, GFL announced that Waste Industries former chairman and CEO Ven Poole will now serve on the board of directors and retain certain senior employment responsibilities for the U.S. solid waste operations. Additionally, former GFL EVP & COO Luke Pelosi has been appointed EVP & CFO of the combined company to replace David Bacon, and Waste Industries EVP & COO Greg Yorston will take on the same role for all of the company’s solid waste operations in Canada and the United States.
Dovigi says that although the merger includes some key personnel changes in the corporate office, it will be business as usual for most Waste Industries and GFL employees.
“[The merger] doesn’t change anything. Obviously both companies have great regional management and none of that’s changing,” Dovigi says. “I think for the employees of both companies, that continues to provide more stability for them. Thanks to having a business with more size and scale, we think it yields and lends itself to more stability, and most importantly, it leads to more career opportunities for those to advance in the organization. The ability to move between districts in different regions, and our philosophy of building and promoting from within, is going to prove out to be a great opportunity for all employees involved.”
Dovigi says that GFL and Waste Industries will continue to work through the merger over the course of the next calendar year to fully integrate the companies.
“Over the next nine to 12 months, we’ll fully execute these plans and move forward as one cohesive group,” Dovigi says.
Navigating new markets
Dovigi says that while there are differences between serving customers in the U.S. and Canada, specifically in terms of the importance of vertical integration in the States, he doesn’t anticipate a substantial learning curve acclimating to new solid waste markets. The major challenge, Dovigi says, will be understanding and navigating the current recycling climate.
“What we’re seeing is a higher focus on sustainability and recycling, and obviously with the recent historic changes to how the business has operated, particularly around the single-stream market [due to disruptions from the China ban], I think that business has sort of done a complete 180,” Dovigi says. “I think we in the waste industry have to be focused on how we’re going to achieve the diversion goals of both large companies and municipalities. That’s going to be a challenge.”
To meet the material quality specifications that are required today, Dovigi says the company is currently focused on retooling its MRFs with the latest technologies to better sort incoming materials. He also says that the company aims to promote proactive diversion throughout the waste stream by better educating citizens and corporate customers on recycling best practices.
“In Canada, we’ve historically taken a little bit of different approach around landfilling,” Dovigi says. “There’s been a lot more focus specifically around organics and food composting. Going forward in the U.S., we want to find other alternatives to keep volume from going to landfills and to manage the sustainability initiatives of people, municipalities and large corporations. It definitely starts with the consumers and education on what should go into the recycling bin based on what can actually be recycled.”
Continuing to grow
According to Dovigi, the merger comes at the right time for GFL in its strategic mission to build off its recent growth in the Canadian market.
“If you looked at what was done in Canada over the last 11 years, we’ve basically built out infrastructure across every market, and I think things are running like a fairly well-oiled machine in terms of the infrastructure platform that we have here,” Dovigi says. “So, we felt it was a good time to look at doing something a little more transformational in the U.S. around a large-scale platform similar to what we’ve done in Canada, where we’ve done two or three large platform acquisitions and built out the rest of the business behind it.”
In addition to the Waste Industries merger, Dovigi pointed to GFL’s recent acquisition of Future Environmental as part of the company’s strategy to expand its North American presence into the U.S.
Based in Mokena, Illinois, Future Environmental is a provider of environmental services to the petroleum, pipeline, utility and chemical markets in the Midwest.
“With a liquid waste services company, we can really create a one-stop shop for all of our customers’ needs, and the recent purchase of Future Environmental is our first large U.S. acquisition in that space,” Dovigi says. “We’ll now be able to cross-sell between the various lines of our business and differentiate ourselves a little bit by offering the customers, particularly on that side of the business, a resource for all their waste needs.”
Dovigi says that GFL will continue to pursue M&A opportunities to expand its footprint in North America in the coming years. The key, he notes, is finding partners like Waste Industries that check all the boxes of what the waste management company is looking for.
“M&A has obviously been a large part of what we’ve done over the last 11 years, and I don’t think that’ll change,” Dovigi says. “Everybody has a little bit of a different lens when they look at M&A opportunities. For us, it’s No. 1 about if the acquisition fits in culturally with what GFL stands for. We look at culture and we look at certain geographies and regions that tick the box of where we want to be, but obviously reputation of the companies has to fit within what we’re doing.
“I think largely we’re in the geographies we want to be in with our presence in 20 states in the U.S. as well as the nine provinces in Canada we operate in, and we want to continue densifying our existing region to continue to grow and really focus on the core market we’re in today. That will be largely where we focus. Obviously solid nonhazardous waste is the biggest market, and then recycling and disposal services, but we will continue to focus on acquiring businesses that fit within that model in the markets it makes sense.”