By Cronus Managing Director Paul Nowak in the Sadis & Goldberg Winter 2025 issue of The Earnout magazine:

Cronus Partners, a boutique investment bank based in Southport, CT, specializes in the Environmental Services Industry (ESI). Our partners have decades of experience in this field, serving as advisors and investors during periods of significant growth and industry consolidation. These days, we typically work with small and middle-market companies to raise capital to fund growth or with owners looking to expand or realize liquidity through mergers and acquisitions. Whether with industry veterans or newcomers, we welcome the opportunity to work with investors, entrepreneurs or management teams looking for opportunities in the ESI.

ESI Overview and Background

Many facets of modern life that we take for granted—uncontaminated drinking water, clean streets, and the safe production of energy and goods—are supported by an extensive network of professionals and businesses working behind the scenes. Over the years industries to address the unpleasant and often downright dangerous by-products of our lifestyles have been created and have grown up in North America and around the developed world: companies that handle our waste products from the production of energy, manufacture of goods, and efficient distribution and delivery of those goods to their end users, and from their consumption and ultimate disposal.

Think about sanitary sewers. Born from the ill effects of rapid urbanization and overcrowding, including cholera and typhoid outbreaks (and the eventual discovery of the link between germs and diseases), in the 19^th century cities like London, Paris and New York began requiring and constructing sewer systems to divert germ-conducive wastewater from city streets into what eventually became centralized water treatment facilities.

In the same timeframe,  [19^th century and 1800s are the same thing – this makes it seem like you don’t know that] cities including London and New York started mandating and providing a systemized approach to keeping solid waste (garbage, ash, food waste, etc.) off streets. Today there are complex systems in place to safely and efficiently collect solid waste from your doorstep and to transport that waste to centralized facilities where it can be sorted, recycled, or otherwise processed for more efficient transportation to disposal facilities. These disposal facilities, what used to be called dumps, are now highly engineered landfills that contain solid waste under cover and capture and treat water runoff and the greenhouse gases that are produced from decay (often turning them into energy).

Industrial production, particularly chemical-intensive industries like pharmaceuticals, agriculture, food processing, energy production, defense, equipment manufacturing, and textiles, create vast amounts of waste byproducts. It was not until the 1960s and ‘70s that regulation born from legacy disposal practices of dangerous wastes (like dumping chemicals into public waterways or  the ground, where they would persist and eventually find groundwater) created a modern hazardous waste management industry.

Modern Industry Sectors and Value Chain

We generally view the industry as having some distinct sectors, including solid waste management, hazardous and industrial waste management, water and wastewater treatment, air quality management, and environmental consulting. There is also a renewable energy component to the industry, particularly with regard to some recycling technologies, but we largely think of renewable energy as its own industry.

Throughout the lifecycle, value is generated across distinct stages:

• Garbage collectors empty household bins into trucks on municipal collection routes. On commercial routes trucks collect and transport waste from larger disposal containers at facilities like big box stores. Small specialized trucks collect batches of medical waste, used oil or small quantities of spent industrial chemicals from medical practices, auto body shops, or small manufacturing businesses.
• Solid waste transfer stations, where waste is emptied from garbage trucks onto floors where it is sorted (taking out recyclables or items that should not be sent to landfills) and compacted into larger trailers or rail cars that can more efficiently transport the waste to a disposal end point. On the hazardous waste side, box trucks consolidate small diverse pickups into combined streams that can be more efficiently transported, usually by tractor trailer, to treatment and disposal facilities that can handle specific types of waste.
• Tractor trailers or rail cars efficiently move larger quantities of more homogenized waste to end points.
• Highly specialized and permitted facilities neutralize and stabilize volatile hazardous materials that can then be safely landfilled. Centralized water treatment facilities sort solids out of wastewater, then physically and chemically treat it to neutralize and render it safe for release back into public waters.
• Often these are end points, including energy-from-waste facilities, incinerators that destroy hazardous organic materials, kilns that use the energy component of some waste streams in the production of cement, or landfills that contain material for the long term.
• Material processing facilities increasingly use technologies including optical sorters that can identify and rapidly sort solid waste streams that can then be turned into usable homogeneous commodities (including metals, papers, glass and plastics) used in new production.

Over the years we have seen these markets consolidate into groups of larger industry leaders. Solid waste companies have led the way through consolidation. Today, the solid waste market is  headed up by a handful of large companies that operate in multiple markets across the country. Public companies like Waste Management (WM), Republic Services (RSG), Waste Connections (WCN), GFL Environmental (GFL), and Casella Waste Systems (CWST) are the industry leaders. Between 2014 and 2023, WM’s revenue grew from $14.0 billion to $20.4 billion, with adjusted EBITDA rising from $3.3 billion (23.6% margin) to $5.9 billion (28.9% margin). Over the same period, the market has increased the public value of a dollar of WM revenue from $2.33 to just under $5.00 today (the company boasts a $106 billion enterprise value), equating to approximately 17.5x EBITDA. Some of the smaller public companies like Casella and GFL trade in the 20s as a multiple of EBITDA. These companies have grown and outperformed the broader stock market. They have also undertaken a considerable number of acquisitions, both reducing the number of large competitors and, in turn, driving up private multiples.

In the smaller hazardous and industrial waste sector, the public leader in the US market is Clean Harbors (CLH), with Veolia, Enviri (NVRI), Heritage Environmental and several other private competitors serving the market. This market has likewise seen significant consolidation over the past decade as private companies have attracted PE and infrastructure investors to combine smaller local businesses into significant regional companies, which have been acquired by larger funds or strategic acquirers. Notably RSG entered the market in 2022 when it acquired hazardous waste mainstay US Ecology, joining WM as a leader in both the solid waste and hazardous waste markets. This year, WM acquired the leader in the medical waste market, Stericycle, for over 20x EBITDA. CLH trades in the mid-teens as a multiple of EBITDA, and smaller competitors trade from the high-single-digits to lower-double-digit multiples.

Water treatment companies like Xylem (XYL), Veolia Environnement, and American Water Works (AWK) lead the US market, but there a many smaller operators of wastewater treatment facilities, collectors and transporters of wastewater, and technology and equipment providers to this essential industry, which has also consolidated considerably over the past decade and more and features EBITDA multiples in the mid-to-high teens.

Construction and engineering companies offer services such as engineering, technical consulting, construction, and scientific expertise, serving many industries, but having a significant environmental solutions component, including remediation of legacy environmental contaminations and construction of significant infrastructure projects (including landfills). The industry is led by companies like AECOM (ACM), Jacobs Solutions (J), Tetra Tech (TTEK), and Stantec (STN). These companies all have multi-billion-dollar enterprise values, trade in the mid-to-high teens EBITDA multiple ranges, and have also been very active in the M&A markets.

What Attracts Investors to the Industry?

The environmental services industry has never been more appealing to investors. Key factors contributing to its attractiveness include:

• They are necessary industries. Their services are essential to maintaining public health and responsible manufacturing and energy production.
• They are generally mandated by law and regulatory action. Governments at both federal and state/provincial levels have implemented stricter environmental regulations aimed at reducing pollution and promoting sustainability.
• Even when not strictly mandated, there has been a marked shift in consumer behavior toward sustainability. Consumers have become increasingly concerned about their environmental impact and are seeking sustainable products and services. Companies prioritizing sustainability are often rewarded with enhanced brand loyalty and market share. This growing demand is driving businesses to adopt greener practices, that, in turn, fuels demand for environmental services.
• They produce reliable revenue and cash flow streams, often having long-term contracts and other barriers to competition, including operating and facility permits that limit potential rivals.
• They have proven themselves to be able to weather periods of inflation, especially over the past four years, and to increase prices at least as much as input costs.
• They are generally able to grow through M&A, via tuck-in acquisition to increase density, or acquisition of complementary geographic companies to expand market footprint, or through complementary services to increase asset and personnel utilization. Even though it is generally a local, geographic, territorial industry, the underlying business model usually translates across locations and markets, allowing owners to leverage the capabilities of strong management teams.
• There are efficiencies to be gained from technological advancement. This logistics-intensive industry has embraced route optimization, but advanced technologies, such as artificial intelligence, data analytics, and automation, are just beginning to reshape the industry. These innovations not only enhance operational efficiency but also create new business models like smart waste management systems or cutting-edge water treatment technologies.
• There are ample exit opportunities. The large public companies are very active acquirers. In addition, private equity has targeted the industry for many years, and companies have established operating histories under multiple PE owners. Fund managers like Kinderhook Industries, Aurora Capital Partners, J.F. Lehman & Company, The Carlyle Group, Gryphon Investors, Littlejohn and Company, Clairvest Group Inc, Heartwood Partners, and many others have successfully built significant private portfolio platforms. More recently, infrastructure funds like EQT (Covanta and Heritage Environmental), I Squared Capital (VLS Environmental) and 3i (EC Waste) have joined long-time investor Macquarie as investors in the industry, realizing the long-term stability of these companies is a good fit with their investment mandates.

Conclusion

The Environmental Services Industry in North America has evolved into a cornerstone of modern infrastructure, providing essential services that underpin public health, environmental sustainability, and industrial efficiency. Over decades, the industry has grown through innovation, regulatory support, and consolidation, resulting in a robust ecosystem of specialized sectors, from solid and hazardous waste management to water treatment and environmental consulting. Its necessity, regulatory backing, reliable cash flows, and adaptability to technological advancements make ESI an increasingly attractive investment opportunity. With ample exit strategies through public strategic acquirers and private equity platforms, the industry offers a stable and scalable business model. As the demand for sustainability and environmental stewardship continues to rise, the ESI is poised for sustained growth, cementing its role as a critical and lucrative sector for investors, entrepreneurs, and strategic operators alike.