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The waste and recycling sector is attracting a lot of interest from investors in the UK and overseas. Stuart Davies explains what is behind this rise in appetite.
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Social impact investment has increased more than ten-fold since 2011 according to Big Society Capital. The waste and recycling sector is core to many of the UN’s sustainable development goals and has experienced change at an envious pace, relative to many other industries. Underpinning growth is an increase in both market supply and demand, aided by a growing population, regulation, ESG, and new processing technologies, including artificial intelligence.
The level of waste production in the UK remains a significant challenge as a ‘throw away’ society has developed during the past couple of decades. The Government has responded with regulation and setting targets to increase recycling.
In addition, consumer education has been driven by media reports on the impact of climate change, as well as government and large corporate initiatives. Consumer behaviour is evolving, with 12.3 million tonnes of household waste recycled in the last year, based on available data. People are recognising the need to recycle and have been actively engaged in pre-sorting at home, utilising residential recycling facilities for general household waste.
In turn, the increased supply of material diverted away from landfill requires high-quality recycling facilities. Many UK sites have expanded rapidly in recent years by investing in technology to improve the capacity of plants, as well as the quality of the output material. Investment has also gone into new sites, as technology-led methods enable the recycling of newer waste streams, including batteries, electric vehicles, and solar panels. A wider range of materials is being recycled, resulting in new revenue streams and improved margins.
ESG is driving the way in large corporates too, who are bringing more recycled material into their own manufacturing. This is driven by companies' ambitions to ‘do the right thing’ and new regulations, as well as demand from consumers, who expect products to contain elements of recycled materials.
All of this means the sector has caught the attention of investors, with 'UK plc', private equity, and overseas entities all showing a real interest in this fast-growth industry.
Our involvement in the sector, including the recent sale’s of Peterborough Metal Recycling and Polypure, makes the growth of this transaction appetite clear. This also aligns with M&A activity in the sector going up by 31% between 2021 and 2022, as further opportunities present themselves to grow plants, in order to meet both the supply and demand needs in the UK market.
Key waste and recycling deal
Peterborough Metal Recycling (PMR) is one of the UK’s leading metal recycling businesses – operating across three sites in the East of England.
The company’s sale to KJB Consulting facilitates an exit for the owner and provides capital for PMR to continue its growth in the sector.
The fact that waste and recycling is relatively immune to economic downturns means that it provides a more certain investment than many alternatives and we expect it to remain an attractive sector for many years to come.
Our TMT and PE experts discuss why TMT is an attractive sector for private equity investment, what the sector means in their world and how they make their respective investment and value-creation strategies. There's also insight on the different sub-sectors and future trends to watch out for in 2024 and beyond.
