I recently attended the annual Waste Expo event held in Las Vegas. It’s always a great networking and learning conference and this year was no different. One of the things I find most interesting at the Expo is the exhibitor area, where the latest environmental technologies are featured. The pace of new product development and innovation in this area is amazing and almost as impressive as the products themselves.
Environmental technologies include anything from water and air purification systems to environmental remediation and solid waste treatment processes to software that automates the dispatching and tracking of containers. At Ironwood Capital, we work with fast-growing environmental service companies looking to expand. Because we are long-term investors, we are always interested in learning how our portfolio companies might benefit from new technologies to provide better customer service, protect the environment and save money.
During my 17-year tenure at Ironwood, we have invested in ten environmental service companies. The following successful growth story illustrates the kind of expanded role we often play as long-term investors, going far beyond simply writing a check.
Patient Capital, Steady Growth
A non-hazardous solid waste collection, recycling and disposal operator servicing a major metropolitan region needed capital to double the size of its business. Management wanted to extend its geographic footprint and also expand capacity through the acquisition of a large competitor and construction of state of the art infrastructure which would incorporate the latest environmental technologies.
Ironwood recognized the potential of the company’s densely-populated service area and was impressed with its outstanding management team. Our own Environmental Services team believed this opportunity would make an excellent platform portfolio company. Beginning in 2007, we worked with company leadership to identify a finance director and an acting chief financial officer. The Ironwood Capital team also coordinated with the company’s senior lender to structure a credit facility to fund the acquisition and planned expansion.
Despite some initial profitability challenges for the company due to the severe market contraction in 2008/2009, Ironwood was steadfast in its support and flexible when appropriate, interceding with senior lenders at key points and providing additional junior capital, allowing management to focus on running the company. During this time, I worked closely with company leaders in my capacity as board member to assess strategic acquisition opportunities and craft expansion plans.
In 2010, Ironwood leveraged its extensive relationships to source an equity sponsor which allowed the company to execute on a second large, transformative acquisition. Following that acquisition, Ironwood led successful recruiting efforts for a permanent chief financial officer and an expert sales consultant to augment the management team, improve profitability and enhance the sales organization.
In 2012, Ironwood sourced a senior subordinated debt lender to provide additional capital for strategic growth initiatives. This group later provided a large unitranche facility to refinance the company’s balance sheet. Additional acquisitions followed, improving the company’s route density and margins. The initial investment in innovative technologies played an important role in accommodating increased waste streams.
Ironwood’s financial investments, paired with active board involvement and expert advisory services, provided key support to the business during a challenging time in the company’s history. Over the course of several years we provided modeling and other financial support, leading to successful capital raises used to finance multiple major acquisitions, state-of-the-art equipment and tuck-in opportunities. Ironwood provided the first institutional capital to the business and played an active role in evaluating strategic initiatives and acquisitions, ultimately positioning the company as a leading integrated environmental services business. Company revenues grew 10 times over from our initial involvement to our successful exit in 2017.
Simultaneous to our involvement with this particular firm, we were invested in several other environmental service companies and successfully exited those investments.
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We continue to look for opportunities to invest in well-managed, profitable and growing environmental service companies where our industry expertise can add value and lead to further growth. All the better if those companies have incorporated some of those new environmental technologies I viewed at the Waste Expo!