Growing a waste and recycling business today is often as much about having the drive and capacity to acquire other companies as it is being able to run a successful operation.
Thankfully for Lakeshore Recycling Systems, rebranded to LRS in April, CEO Alan Handley is well-versed in both disciplines.
Handley, who has a bachelor’s degree in accounting and an MBA from Northwestern’s Kellogg School of Management, held leadership positions at Heller Financial, Price Waterhouse, the United States Marine Corps, Mesirow Financial/KPMG, and Aldridge Group before joining LRS as CFO in 2012.
Upon joining the company, Handley played a pivotal role in the vertical integration between two Chicagoland companies, Recycling Systems Inc. and Lakeshore Waste Services, which were in the process of merging into Lakeshore Recycling Systems at the time.
Handley says that this integration established the foundation from which the company would blossom.
“The merger of these two important players in the Chicago waste and recycling market combined a largely commercial hauling operation with one of the largest MRF/transfer stations in the Midwest,” he says. “We were generating approximately $48 million in 2012, with a few hundred employees and two operating sites.”
Following the merger, LRS worked to strategically acquire transfer assets and commercial operations throughout the Chicagoland market, including recycling operations, C&D sites and transfer stations. The company then began branching out to nearby states.
“Our expansion strategy continues to involve integrating and leveraging sites as close to our work as possible, enabling a dynamic, fluid hub-and-spoke approach to business development,” Handley says. “We complement our MRFs, depots and recycling facilities with our ability to provide residential, commercial and temporary services such as portable restrooms and street sweeping.”
Since 2012, LRS has closed more than 25 strategic acquisitions in five states, including Illinois, Iowa, Wisconsin, Indiana and Michigan. These deals have helped propel LRS to become the largest independent waste, recycling and portable services provider in the Midwest, generating approximately $300 million in revenue annually. The company boasts an employee base of 1,200 and an asset base of 26 facilities, including landfill assets in the Quad Cities market of Iowa and Illinois.
An independent voice
As Handley explains it, LRS’s M&A pursuits have aligned with the company’s goal to first strengthen its presence in its Chicagoland home market, and second, to branch out to nearby markets ripe with opportunity.
“Our strategy has focused on first building a large defensible perimeter around the city with strategic operations, sales and marketing assets from which we could build and grow organically,” he says. “We also have grown the residential and commercial lines of our businesses, and our temporary services divisions, including roll-off, portable restrooms and street sweeping. At the same time, we identified the need to be more geographically diversified.”
In identifying some of the most transformative deals the company has made, Handley points to its acquisition of the Eco Hill Landfill in Atkinson, Illinois. The deal, Handley says, “provided control of our own destiny” since prior to the acquisition, all of the landfills surrounding the company’s service areas were controlled by large, publicly traded waste competitors.
Handley says that as LRS grew, not having a landfill asset under its belt began to create friction for the company. By acquiring the landfill, which has more than 20 years of service life left, LRS can better serve its customers’ disposal needs while allowing it to go head-to-head with its competitors. While the landfill allows for more economical disposal for the company, Handley is quick to say that having it as an asset hasn’t changed the company’s recycle-first approach to incoming material.
“I’d say the Atkinson landfill acquisition was a transformational event in the history of the company. Two years ago, the Eco Hill Landfill was essentially dormant and today, by all accounts, it is the third largest landfill in Illinois. The interesting fact with Eco Hill is that it did nothing to change our core recycling orientation,” Handley says. “Our DNA in that regard is fully intact. We continue to recycle as much material today as we were two and three years ago, the only difference today is that material and residue we are not able to recycle is internalized within the company instead of being sent to our competitors.”
To help the company market its incoming C&D materials, Handley says LRS has been working to create opportunities through innovation. From a commodity standpoint, Handley says LRS is constantly scouring the market for alternative outlets, as well as alternative end products.
“Whether that means shifting from current production outlets or being innovative on how to divert products from the waste stream, we push ourselves to optimize diversion and repurposing,” he says. “For example, instead of grinding or shredding material for a one-time use application, we seek ways to get the whole product back out into the marketplace, continuing the life of that product, and extending the life cycle of that stream. Our goal is to remain nimble and innovative, while maintaining our high sustainability standards.”
Specific to growing its C&D operations, Handley acknowledges several recent deals that have been especially impactful, including its 2017 acquisition of West Chicago-based K. Hoving Companies and the acquisition of Royal Container in Madison, Wisconsin in 2018. In December 2020, the company announced it acquired Appleton, Wisconsin-based Landfill Reduction and Recycling Inc., and in 2021, the company followed that up with what Handley calls LRS’s “largest acquisition to date” when it bought Maywood, Illinois-based Roy Strom Companies.
When the deal was announced in the first quarter, LRS said Roy Strom was “among the most respected independent waste haulers in the Chicagoland market” and allowed the company to add “an extensive, long-tenured residential and commercial customer base, well-positioned single-stream and C&D recycling operations, and a strategically located transfer facility in Maywood that serves many local operators” to its portfolio.
In looking at the company’s recent string of acquisitions, Handley says the deals have been important for not only helping the company extend its reach, but also ensuring an independent waste option for local customers.
“From a big picture perspective, we are generating sorely needed competition as one of the more dominant independent waste and recycling companies in the United States,” he says.
The company’s status as an independent has also helped grease the skids of prospective M&A deals with companies that are looking to preserve their culture and employee base, Handley says.
“We have a demographic shift taking place in the United States for aging family businesses. LRS provides a unique alternative in that we are able to compete on top-line price with our larger competitors, but we are also able to preserve the culture, best practices and employee base, including drivers, that made these companies so successful through the years,” he says.
Dealing with changes
As with virtually every other waste and recycling company across the country, the past year has forced LRS to deal with rapid changes brought about by COVID-19.
On the residential front, Handley says that the company’s incoming volumes have been up significantly with more individuals staying home. Conversely, commercial volumes have dropped precipitously.
Regarding C&D, Handley says volumes have been up as many schools, hospitals, contractors and homeowners undertook large renovation projects during the pandemic. In addition to these volumes, Handley says that LRS’s portable services division helped support the company over the last 12-plus months.
“Volume levels in roll-off and through the MRFs and recycling centers were all up, and that led to better-than-expected results in 2020,” he says. “Beyond that, I think the main takeaway from the pandemic is that our portable services division—particularly portable restrooms, hand sanitizer and handwashing stations—were in very high demand. Large construction companies and other companies in industries more exposed to maintaining high sanitary requirements were prime customers for us during the pandemic.”
For the rest of 2021, Handley says low interest rates, pent-up demand, and movement away from urban residential and business spaces to suburban community development should support sustained construction activity.
Looking forward to 2022, Handley says there are a number of variables that could affect the C&D market.
“Next year will be interesting on the C&D front—much of the growth appears to hinge on Congress and its ability to pass an infrastructure bill to improve the condition of our roads, bridges, ports, airports and rail lines,” Handley says. “What will the short-term and long-term interest rates look like? Do people move back into the city or is there a permanent, or at least a semi-permanent, move out to the suburbs and away from the city? I don’t think anybody can answer those questions just yet, but when I discuss this with my colleagues in the construction world, much of the conversation centers on interest rates, backlog, site locations and the general level of optimism in the marketplace.”
Despite some uncertainty, Handley says LRS is expecting incremental volume growth for 2021 and 2022, a rebalancing of residential and commercial volumes, as well as the continued growth of its customer base.
In April, Chicago’s Department of Streets and Sanitation (DSS) announced LRS won a 3-year contract to provide residential recycling collection services in four of Chicago’s six recycling regions beginning this June.
DSS, which noted the contract is for $79.6 million, cited LRS’s investments in recycling infrastructure as one of the factors that played a role in the company being awarded the contract. In a release, DSS notes that LRS has “more recycling assets than any other company in the Chicago area, including a state-of-the-art single-stream recycling facility that can sort cardboard, mixed paper, glass, steel, other metals and plastics.”
A deeper connection
When asked what has helped propel LRS to where it is today, Handley mentions the word heritage. He says the company was founded by entrepreneurs who remain actively involved in the business, and this ethos has continued even amid aggressive M&A pursuits. He notes that even though the company has acquired more than two dozen independent waste, recycling and temporary services companies over the past eight years, the majority of these company founders and executives have stayed on to serve in roles critical to LRS’s daily operations.
According to Handley, this retention has manifested in a deeper connection with the communities the company serves.
“If you look at our explosive growth through the years, you will find one factor that sets us apart is the cohesiveness of our team,” he says. “We have a tremendous sense of comradery at every level of the organization, a great sense of community and family, and a real connection to the communities we serve. From maintenance technicians and drivers to senior-level managers and officers, [we have employees] who live and raise families in those communities. We view our employees and the communities we serve to be symbiotic—as a company, we have a vested interest and responsibility in seeing them thrive.”
It’s this commitment to the company’s personnel and communities that Handley says gives LRS a leg up when it comes to future opportunities.
“I always say that anyone can buy a truck or a route, but the real work is in sustaining those routes with great people who operate within a great culture. That is our daily focus as we think about scaling our growth,” Handley says.
While Handley has helped fuel LRS’s rapid expansion over the last eight years, he says that opportunities still abound in the Midwest market.
“The recent exit of Advanced Disposal creates a void in the greater Midwest that is perfectly set up for LRS to take advantage of,” Handley concludes. “These markets now have large exposed gaps in competition, product offerings and customer service. Our platform of services coupled with our best-in-class customer experience is destined to be delivered to these markets via organic expansion as well as through strategic acquisition. Our aggressive posture, customer-first focus and unparalleled devotion to recycling will propel us into the next chapters of a story still being written. It’s not unreasonable to believe we may very well double in the next year to 18 months and be more prominent than ever in the markets we serve.”