The city renewed its contract with Waste Management despite a competitive bid from FCC Environmental Services.
The city of Fort Worth, Texas, voted unanimously Nov. 9 to extend its contract with Houston-based Waste Management valued at nearly $479 million over 12 years.
As reported by the Fort Worth Report, this decision comes despite at least one company—The Woodlands, Texas-based FCC Environmental Services—estimating it could save the city $60 million during that same time period.
Assistant City Manager Valerie Washington told the Fort Worth Report before a city council meeting that it is easy for competitors to make such claims when they don’t have to back them up. She thinks the city got the best deal it could under the circumstances.
However, FCC Environmental Services Director of Public and Governmental Affairs Erica Holloway questioned how Washington could know that.
“Fair and open competition is what makes the economy go round, and the only way to know for certain you’re getting the best deal is to test the marketplace,” Holloway told the Fort Worth Report.
The deciding factor for several city council members was Waste Management’s proposal to subcontract with Fort Worth-based Knight Waste Services, a minority-owned local business; to waive the consumer price index adjustment for fiscal year 2022; and to install cameras in its trucks.
“We spend a lot of staff time and resources trying to ascertain missed trash pickups. The cameras will help us capture that information on the front end,” said council member Carlos Flores.
Waste Management will install the cameras and train its personnel on how to use them by May 1, 2022, according to the contract extension term sheet.
Other changes to the contract include a requirement to pick up missed trash and recycling within 24 hours and missed yard waste and bulk waste within 36 hours. If Waste Management fails to pick these up within that time frame, it would be considered “a priority one collection.” The company must strive to reduce this type of collection by 20 percent for trash and recycling and 10 percent for yard waste and bulk waste. It also must meet other goals set each quarter by the city to avoid $60 fines for missed collections.
The contract extension allows the city to fine Waste Management if it misses three daily collection routes in a month. The fine would be $300 per missed route collection.
At Waste Today’s Corporate Growth Conference, a panel of seasoned executives discussed what operators should know when thinking about selling their business.
The decision whether or not to sell is often a painstaking one for waste and environmental services business owners, but in an era marked by M&A activity, it is a decision many operators are being forced to consider.
At Waste Today’s Corporate Growth Conference, which took place Nov. 4 in Chicago, a panel of experts discussed what operators should know about the selling process in a session titled, “What I've Learned Selling My Waste Business.”
Moderated by Houlihan Lokey Managing Director Scott Sergeant, the session featured a panel that included Anthony Lomangino, former owner and CEO of Southern Waste Systems; Mike Malatesta, former owner and CEO of Advanced Waste Systems; James Devlin, chairman of the board of directors and CEO of Inframark LLC; and Danny Ardellini, founder and CEO of Environmental 360 Solutions.
According to Sergeant, every potential deal has distinct challenges that operators have to navigate.
“My team and I have executed 60-plus M&A transactions in the environmental services sector, and every one of those deals is different,” he said. “The deal dynamics are different, the ownership structure, the type of buyer, working toward the objectives, the culture and personalities and all the other nuances of the deal [are unique in each case].”
According to Lomangino, who successfully sold two companies to Waste Management, his decisions to sell were based both on the timing of the market and his desire to free himself from some of the financial responsibility of owning his companies.
“There are a number of reasons why people sell, but in my case, it was the timing of it,” Lomangino says. “You want to be wise and sell when the market is starting to peak. And also, you [have to assess what is] your individual tolerance for debt. So, we didn't [take on] private equity [partners] … so you get a lot more pressure on you that way, and that can get to you after a while. So, in my case, we grew it as much as we wanted to grow it, and the market timing was correct, so we just wanted to take some chips off the table and move on.”
For Malatesta, his foray into selling a business came when Covanta expressed its interest in acquiring Advanced Waste Services’ industrial waste business in 2015.
“We were going to be a platform company [of Covanta], and I started to see a lot of opportunity for the folks on our team that could be accelerated in a way that I couldn't accelerate it at the time,” he said. “And so, I personally said no, not interested [at first]. And I thought about it for a while. And then I started writing down some numbers and I thought, ‘Well, if we get to this number, I'm going to sell,’ and we eventually got to that number [which was $51.5 million, or around 8 times EBITDA.”
Malatesta also said that it was a good time to sell for the business because Advanced Waste was free from lawsuits, violations and other legal and regulatory entanglements at the time, which helped frame the business in a positive light and allowed the company to maximize its return.
For Ardellini, who was approached by GFL Environmental in 2009, it was a good time to sell because it helped relieve him of some personal debt he incurred in growing his business, but also, the opportunity allowed his team to stay onboard and intact following the acquisition.
“Obviously, multiple is everything when you're selling your business, but our employees became the foundation for the solid waste business at GFL,” he said. “So, it wasn't [like selling to one of the big public companies at the time who would come in and] get rid of all my management and dismantle everything we built. That was a very important part of my decision and merging with GFL—the employees would stay onboard.”
Malatesta also shared that one of the lessons he learned when selling his first business was the importance of bringing on third-party advisors rather than trying to sell the business on his own. This lesson hit home when the acquiring company called him late in the sales process to reduce its offer.
“Had I had professional representation, first of all, I never would have gotten that call,” he said. “Second of all, that call would have come to somebody else, and they would have told them that's not happening and these are the reasons why. I would never have wasted energy on that.”
Ardellini echoed Malatesta’s sentiments on the importance of seeking professional representation when selling a business in order to help make the process easier and free up the owner to concentrate on operations.
“Today, when I’m on the other side of the table buying companies and I interact with these owner-operators, I encourage them to go get professional help because the process of making the deal is one thing, but all the due diligence and all the follow-up becomes tedious,” Ardellini said. “These owner-operators are entrenched in running the day-to-day business, and you don’t want to distract them from that while they're getting an acquisition checklist together of 80 to 100 things that they have to do.”
In terms of assessing interest parties, Lomangino noted that sellers should both think about the multiple that is being offered as well as the likelihood that the acquiring company is going to see the deal through to its completion.
“If you're entertaining a number of different possible buyers, one of the main things you got to consider is who's the most likely to complete the transaction,” he said. “Are they big enough? Are they ‘bigger than the deal?’ It always helps if they are bigger than the deal because when you get to crossing the t’s and dotting the i's and you’re down to the finish line, if you’re dealing with scared money, they could jump away from the table after you’ve left everybody else behind.”
Lomangino also stressed the importance of keeping the prospect of a sale confidential to employees—both to keep business running as usual, but also, because no deal is certain to close due to various macro and microeconomic factors.
Finally, the panelists agreed that selling a business requires being able to mentally distance oneself from attachment to the company and being able to cope with the feelings of estrangement that may ensue following a sale.
“I always thought that my first company was one of my children, and I was worried about handing it off to the next person,” Ardellini said. “That was until I talked to my lawyer at the time who told me, ‘This is a business. You’ve done very well for yourself. Let it go.’ And it was hard for me to let go of my first company. It took me months to get over.”
Europe-based technology provider says its sensor product can distinguish between types A and B wood scrap.
The Tomra Recycling business unit of Norway-based Tomra Group says it has strengthened its offering for the global wood recycling sector by becoming “the first in the world to use deep learning, a subset of artificial intelligence (AI), in wood recycling applications.”
The company has combined its Autosort technology with its deep learning-based sorting add-on, GAIN, to deploy technology that can distinguish between and sort different types of wood-based materials, “significantly enhancing customers’ sorting and manufacturing processes,” according to Tomra.
The primary application for Tomra Recycling’s new system is sorting type A scrap wood, or non-processed wood pieces, from type B scrap wood, which consists of processed wood products such as MDF (medium-density fiberboard), HDF (high-density fiberboard), oriented strand board (OSB) and chipboard.
Tomra Recycling says it has been serving the global wood recycling sector for more than 10 years. The company’s X-Tract device is used by chipboard manufacturers to produce a clean recycled wood chip fraction by sorting and separating out metals and inert materials such as glass, stones and ceramics, says the company.
An increasing number of customers are looking to use higher purity level recycled wood in their production processes, according to Tomra, with many of them viewing engineered wood composites as materials to be removed.
Since such materials are not distinguishable using X-ray technology, the firm had to go beyond using X-Tract units, so its researchers developed the new deep learning method.
“Wood recycling is a fast-evolving market, with increasingly stringent legislation being introduced in a number of regions globally to move towards a more circular economy model,” remarks Philipp Knopp, a product manager at Tomra Recycling. “Our Autosort with GAIN solution will enable our customers to future-proof their operations as they will be better equipped to adapt and react to any future changes in the global wood recycling market such as new legislation. We are delighted to be the first in the market to offer this artificial intelligence-based solution.”
Law firm advises manufacturers and brands to be ready for SB 343 scrutiny starting in 2024.
The recyclability labeling bill signed into law in early October contains numerous aspects, but a national law firm is warning companies not to overlook one involving the long-established “chasing arrows” symbols stamped onto plastic bottles, trays and items of all kinds.
In an alert posted to its website Nov. 11, Arent Fox, which has five offices in the United States, says new standards to use those arrows codified in California by SB 343 are “stricter than the standard established by the U.S. Federal Trade Commission (FTC) in its Green Guides.”
The FTC is relatively lax in permitting users of the chasing arrows to label a product or material as recyclable even if “recycling facilities are available only to a few consumers,” writes Arent Fox.
But in California, starting Jan. 1, 2024, a much more detailed and goal-oriented set of guidelines will come into effect. According to the law firm, “a product or packaging will be considered recyclable in the state only if it meets the following requirements:
Some environmental advocacy groups are hailing the Golden State’s crackdown, having long expressed frustration with the appearance of the logo on types of packaging and products that are seldom recycled.
When SB 343 was passed by California’s legislature in September, however, several trade organizations expressed opposition, including the Washington-based Institute of Scrap Recycling Industries and (ISRI), which said in part “the bill’s definition—and thus its criteria—for considering materials as ‘recyclable’ completely misses the mark.”
As of now, however, the new standards are set to take effect at the start of 2024. Writes Arent Fox in its alert, “The California law appears to significantly limit the use of the recycling symbol and recycling claims on products or materials that cannot be recycled through curbside municipal recycling programs in at least 60 percent of the state. Advertisers wishing to advertise as recyclable an item that cannot be collected curbside will need to have a very effective non-curbside recycling program in place” if they wish to retain their arrows.
Council members in Fort Wayne, Indiana, are seeking answers after the Texas-based trash hauler filed for bankruptcy last month.
Nearly a month after Red River Waste Solutions filed bankruptcy, council members in Fort Wayne, Indiana, have requested to subpoena the current president to address unanswered questions about the future of Red River and the city’s trash collection service.
As reported by Wane.com, Councilman Russ Jehl said, “I left last week’s solid waste advisory board meeting under the impression almost no, perhaps, none at all real discussion has taken place between Fort Wayne leadership and Red River leadership over the past two years.”
He continued, “Also the performance bond which is to protect the citizens of Fort Wayne and there’s a default may be in jeopardy because it needs to be renewed annually on a calendar year basis. Time is of the essence and waiting around and hoping that things get better is proven for four years to be a poor strategy. I propose that the council invite Red River’s CEO to brief us directly and when he rejects that we inquire the legality to subpoena him.”
In January 2018, Red River took over Fort Wayne’s trash and recycling contract which covers over 25,000 homes. Since then, thousands of complaints have been filed against the Texas-based trash collection company.
After the company filed for bankruptcy on Oct. 14, council asked that an official from the company be present at the meeting. However, due to a “scheduling conflict,” officials did not attend.
During the meeting, several council members raised concerns about the ongoing complaints on missed or late trash pickups. Some members were also worried about rate hikes, Wane.com reports.
Councilman Tom Didier has asked that council also send a letter to state lawmakers about what they can do in the future. Due to state law, the city must take the lowest bidder for a contract. For example, the city went with Red River for trash removal instead of staying with Republic Services because Red River made a lower bid.