Dive Brief:

• Waste Connections acquired New York City-based Royal Waste Services earlier this month, according to multiple sources and job postings. This is one of the industry’s first sizable transactions in the city since the Department of Sanitation awarded commercial waste zone contracts earlier this year.
• Royal was one of the city’s largest privately owned haulers, with more than 120 vehicles according to federal records. The Queens-based company’s assets include a transfer station and recycling facilities.
• Waste Connections was not available for a comment prior to publication. The city’s Department of Sanitation did not respond to a request for comment on how this deal may affect competition in certain areas.

Dive Insight:

M&A activity has affected just about every key region in the U.S. during recent years, but the New York City market was largely frozen as companies waited to see who would receive contracts through the new commercial waste zone system.

The city currently operates under an open market system, in which any hauler licensed by the city’s Business Integrity Commission can serve commercial customers throughout the five boroughs. DSNY’s new system breaks the city up into 20 non-exclusive zones with three haulers each, and allows customers to select from those options. The city also awarded five citywide contracts for large container service. Implementation began in the first zone, Queens Central, on Sept. 3. Customers in that zone must have a signed agreement in place by January.

Waste Connections won 12 zone contracts, plus one citywide contract, which was the second highest of any company aside from Interstate Waste Services subsidiary Action Environmental. Royal won five contracts, plus others via the New York Recycling Solutions joint venture with Cogent Waste. Waste Connections’ purchase of Royal did not include the joint venture stake.

DSNY has only announced implementation timing for one zone so far, leaving questions about how long companies that didn’t win zone contracts will be able to operate their businesses. Companies will also have the option of serving as subcontractors for zone awardees. DSNY has not confirmed the approval of any subcontractors to date.

Questions about this extended implementation period came up during a council hearing in June, which also included discussion about potential market consolidation. A bill was introduced seeking to more closely regulate M&A involving zone awardees, but it has not passed out of committee.

Companies with post-collection assets, which are hard to site and expand in the New York City market, are seen as especially attractive M&A opportunities for zone awardees. 

Royal, through related company Regal Recycling, operates a transfer station in southeastern Queens. The site has a permitted capacity of 462 tons per day, according to the latest city records. A portion of this is also dedicated to source-separated organics, which Royal collects and manages before shipping it out to processing facilities. Last year, the company settled a lawsuit with environmental groups to improve stormwater and odor management practices.

Royal also has multiple registered recycling facilities, including a single-stream recycling operation, which can process an estimated 15,000 tons per month according to a company video. This allows for a notable expansion of Waste Connections’ local recycling processing capabilities.

New York City requires companies to notify BIC about any change in ownership involving commercial waste licensees. BIC confirmed that it received the required notice about this transaction.

The commercial waste zone system also gives DSNY the option to update contract awards if an acquisition affects competition in any zones, or would lead to one company having contracts in more than 15 zones. Waste Connections and Royal overlapped in one zone, Queens West, and had contracts in 16 different zones based on initial awards.

Waste Connections initially entered the New York City market with its 2016 purchase of Progressive Waste Solutions, which owned IESI’s collection and transfer assets, and is the industry’s only publicly traded company with a large presence in the city. The company purchased a transfer station in the Bronx in 2019, but this is its first sizable deal since entering the market.

During the company’s latest earnings call, Waste Connections CEO Ron Mittelstaedt previewed “a record year of private company acquisition activity in 2024” that could amount to $700 million in annualized revenue acquired.

This transaction is the latest in a series of recent deals involving various companies in the New York area including WM’s purchase of Long Island-based Winters Bros. Waste Systems.