Capstone Headwaters sees growing waste and recycling service arena

Boston-based investment banking firm Capstone Headwaters says it sees waste and recycling service providers in North America “poised to capture elevated demand amid increases in waste volume.”

The company’s most recent two-page "Waste & Recycling Executive Summary," which it issues quarterly, finds that “waste volumes have normalized following a [second quarter of 2020] spike in residential waste and a decline in commercial waste driven by stay-at-home orders” caused by COVID-19 restrictions.

The investment firm adds, “Notably, resurgences in economic activity have increased commercial waste volume, heightening demand for nonresidential waste services.“

Capstone Headwaters also refers to “operational challenges related to staffing limitations and social distancing requirements,” but says earnings reports it has studied are “demonstrating that high-quality businesses that have displayed resilience amid the pandemic continue to fetch strong valuations and garner [investor] interest.”

Regarding the merger and acquisition landscape, the firm says, “Strategic public buyers, accounting for 27.3 percent of total 2020 M&A activity, continued to consolidate smaller industry participants to spur inorganic growth and capture a larger market share.”

Capstone Headwaters adds, “Private equity add-on deals composed 37.8 percent of 2020 transactions as [equity] firms continued to utilize tuck-ins to bolster the geographic reach of platform investments.”

The firm says sustainability commitments will continue to prompt recycling interest, writing, “Capstone expects companies to pivot investment toward their recycling segment in order to capture elevated demand as consumer goods companies increasingly utilize recyclable materials.”