Firm creates business through acquisitions, stock sale


What is the formula for fast-track growth for an environmental company? If you ask American Waste Services Inc. of Youngstown, Ohio, they will tell you to start by gaining expertise on a specific service.

Next step: Form relationships with other service providers. Then make strategic acquisitions with the help of some private financing. The last rung up the ladder is taking the company public to gain the financial muscle needed to become an integrated center that provides a single place for clients to take care of all their needs in a particular environmental area of concern.

Not that success lies in just making acquisitions. American Waste's president Darrell Wilson stresses the importance of acquiring the right companies and the ability to integrate new acquisitions into the corporate culture. Integration is now the first order of business for AWS, according to Wilson, as the company has been busy completing nine purchases, the most recent thanks to an initial public offering that netted $56 million.

American Waste was started by Wilson and his partner Ronald Klingle in 1986 as a disposal brokerage firm after both had been in the waste business for a number of years. The company would be consulted on problems at a plant, study the process and implement a solution. As a broker, the company arranged for disposal with contractors, marking up costs to provide its own compensation.

American Waste now has three landfills, three transportation subsidiaries and three technical service companies. The goal is to provide one-stop shopping for customers with "special waste," the kind that falls somewhere between hazardous waste and garbage, such as tires, sewage sludge, air pollution control dust and asbestos.

Wilson estimates that half of AWS revenues comes from transportation. Disposal accounts for 30 percent and technical services the remaining 20 percent. Sales for a recent 12-month period were $79.5 million.

Transportation is much less profitable than the other operations, having margins of only about 5 percent. Transportation is highly competitive in special waste, according to Wilson, who asserts that barriers to market entry are very low and a company can indeed "get into the business overnight." Although not as profitable as the other areas of the business, transportation is "a key element in the overall picture," Wilson says, adding that disposal-site operators like to know where special waste is coming from.

Landfills provide the highest profit margin for AWS primarily because of fixed costs associated with the facilities, Wilson says. AWS' most recent landfill acquisition was the purchase of a municipal site in East Liverpool, Ohio. As part of the deal, 17 percent of gross revenues go to the city for the next 20 years.

Wilson says privatization of municipal sites is something that AWS will pursue in the future. Although AWS characterizes itself as a regional firm serving the Northeast, it is seeking to buy more large-scale landfills in the Southeast, Midwest and on the Eastern Seaboard.

The most recent acquisitions, however, were three technical service companies Earth Science Consultants Inc., Antech Ltd., an environmental lab, and CRS Inc., a remediation firm. AWS used $20 million of the proceeds from its public offering to buy the companies.

Wilson expects to see a lot of income generated in technical services from expertise in handling complex permits. Wilson says, "For many companies, special waste is just piled up on the back 40, and to move the stuff can bankrupt even the biggest company."

Wilson says regulators will be more inclined to approve permits because AWS, not the waste generator, will be operating the site. Also, agencies are closing more sites than they are opening, so there is a need for more facilities. AWS' permitting service has attracted a lot of interest, and it is in discussion with seven or eight large companies already, Wilson says.

Grant Ferrier is editor of the Environmental Business Journal, San Diego, Calif.

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