Dive Brief:

• Republic Services has acquired New Jersey-based ACV Enviro from private equity firm Kinderhook Industries, marking a sizable expansion of its environmental services business. Financial terms were not disclosed, and Kinderhook declined to comment.
• "We are excited to welcome ACV to the Republic Services team," said Donna Egan, director of external communications, in a company statement confirming the transaction. "Growing the environmental solutions portion of our business allows Republic to leverage core capabilities to meet increasing customer demand, further our positive impact on the environment and help our customers reach their sustainability goals."
• The ACV acquisition comes with more than 900 employees; two hazardous waste transfer, storage and disposal facilities (TSDF); nine 10-day transfer facilities and 26 service centers around the Northeast and Midwest, according to financial advisor Brown Gibbons Lang & Co. The vertically integrated company focuses on hazardous and nonhazardous waste, including a range of remediation and emergency-response services.

Dive Insight:

Republic executives have foreshadowed their planned environmental services expansion for months during earnings calls and investor events, and this deal is a sizable step in that direction.

"These are businesses or service lines that we've been in for long periods of time in very incremental ways," said CEO Jon Vander Ark during the company's August earnings call. "Customers have asked us to play a better and bigger role as they look to consolidate their supply base around fewer providers who can have great safety track records, have a digital interface and good sustainability records."

Republic sees this as a potentially $20 billion addressable market and has been pursuing it for years through smaller acquisitions and greenfield projects, according to comments company leaders made at the WasteExpo investor summit in June. During that event, Chief Development Officer Brian Bales described that market as "still pretty fragmented, which gives us a lot of opportunity to be able to grow both organically and through M&A."

Republic's existing environmental services division generated $191.7 million in revenue for 2019, followed by a drop to $127.7 million last year due to pandemic effects. Environmental services revenue for the first half of 2021 was $59.3 million. Chief Financial Officer Brian DelGhiaccio recently described that existing business as about 30% in the "upstream oil and gas sector," with 70% in the "downstream petrochemical and broader industrial manufacturing sectors." Republic expanded into the former area by acquiring Tervita in 2014, and it has since grown that segment into numerous oil basins, but it has been affected by broader declines in that market.

The company's latest quarterly filing describes revenue from environmental services as mainly including "fees we charge for disposal of non-hazardous solid and liquid material and in-plant services, such as transportation and logistics," with material coming from "daily operations of industrial, petrochemical and refining facilities, including maintenance, plant turnarounds and capital projects" in addition to oil and gas exploration.

ACV's vertically integrated portfolio, with RCRA Part B TSDFs in New Jersey and Pennsylvania, offers Republic a strong platform to grow new and existing business in this area. Because Republic already handles special waste for industrial and manufacturing clients, this is seen as a logical expansion. According to Kinderhook, ACV serves a range of commercial and government customers, including "utilities, refineries, power plants, and chemical manufacturing plants, in addition to academic and medical institutions." ACV's 2020 revenue was recently reported as $200 million by Waste Today.

"This is an outstanding outcome for Kinderhook, ACV, and its employees. The ACV team, led by Andy Shackett, executed on an aggressive growth strategy to build a highly strategic, vertically integrated environmental solutions business. We are very proud of the ACV team’s accomplishments and expect the company to continue its track record of success in the future," said Rob Michalik, a managing director at Kinderhook, in a statement.

Multiple ACV Enviro employees posted photos on Linkedin of welcome banners from Republic at ACV facilities marking the occasion yesterday. Shackett, who became ACV's CEO in 2017 after working at Clean Harbors, is expected to stay on with Republic and lead a new corporate segment that includes the ACV assets, according to sources. Republic declined to confirm that information, and Shackett could not be reached for comment.

ACV's original history dates back to 1976, but its current form stems from a pair of Kinderhook acquisitions in 2015 — Clean Venture Cycle Chem and Allstate Power Vac. The ACV Enviro brand launched in 2016, growing with the acquisitions of Walker Industrial Services in 2017 and CTR Industries in 2018.

This marks the second recent transaction between Republic and Kinderhook, following divestitures that went to solid waste companies in the private equity firm's portfolio as part of the Santek Waste Services acquisition.

While major North American solid waste companies used to have a bigger presence in the hazardous waste or environmental services space, that has shifted over the years. Waste Management and Waste Connections also handle oil and gas waste, but neither currently has a sizable presence in other environmental services business lines. GFL Environmental handles liquid waste, along with infrastructure and soil remediation services, but that is an increasingly smaller part of its business compared with solid waste.

Republic's move into this area now puts it in competition for customers and potential acquisition targets with a broader range of other companies. Prior to this deal closing, Republic reported spending $567 million on acquisitions through the second quarter. Vander Ark projected that figure would easily go above $600 million and anticipated "a really strong year" of activity.