Waste Management Market in the Spotlight as Investments Surpass 3.6 Trillion Won This Year

Private Equity Firms Accelerate Waste Management Acquisitions
This Year’s Investments Already Surpass Last Year’s Total
High Entry Barriers and Steady Market Growth Draw Attention

The private equity fund (PEF) industry is continuing its aggressive investment to acquire waste management companies. Last year, 3.3 trillion won was injected into the related market, but this year, the amount is expected to far surpass that figure.

According to the investment banking (IB) industry on September 16, domestic and international PEFs have already invested approximately 3.6 trillion won in acquiring waste and water treatment companies this year, easily exceeding the total investment made last year. Considering the numerous ongoing deals happening behind the scenes, it is anticipated that more than 4 trillion won will flow into the market this year.

At a recycling sorting facility in Busan, recyclable waste such as plastics discharged from each household is being sorted. Photo by Yonhap News

This year, several major mergers and acquisitions have taken place in the waste management market. The largest single transaction was Glenwood Private Equity's acquisition of LG Chem's Water Solutions business unit. In June, Glenwood Private Equity signed a contract to acquire the business for 1.4 trillion won through a business transfer. The LG Chem Water Solutions business unit develops and supplies RO membranes (reverse osmosis membranes) and is the world's second-largest company in the seawater desalination sector.

Trillion-won deals have continued. Last month, Kohlberg Kravis Roberts (KKR), considered one of the world's top three PEFs, acquired three SK Ecoplant environmental subsidiaries-Renewus, Renewon, and Renew Energy Chungbuk-for 1.78 trillion won. Renewus is the top company in public sewage and wastewater treatment operations, while Renewon and Renew Energy Chungbuk focus on waste collection and treatment as their main businesses.

In June, Affirma Capital acquired all waste management companies owned by Singapore-based infrastructure investment firm Equis Development, including CEK (formerly KC Environmental Service), for 400 billion won. CEK, formerly KC Environmental Service, is the third-largest waste management company in Korea. Last year, Affirma Capital formed a consortium with Theham Partners to acquire JNTech, a hazardous waste final disposal company located in Dangjin, South Chungcheong Province.

As a result, approximately 3.6 trillion won has already been invested in waste management company M&A deals this year alone. According to the Financial Supervisory Service's tally of PEF investment executions, 3.3 trillion won was invested in sewage, waste treatment, and recycling businesses last year. This represents a 450% surge from the previous year's 600 billion won, and this year’s investment has already surpassed that.

Considering ongoing deals, more than 4 trillion won is expected to be injected into the waste management market this year. Recently, the main bidding for waste management company Koentec took place. The main shareholders, E&F Private Equity, IS Dongseo, and the sale advisors UBS and EY Hanyoung, conducted the main bidding, with Affirma Capital, Geo Capital, and IMM Private Equity participating. The sale involves 100% of Koentec’s shares, and the sellers are hoping for a price of around 800 billion won.

The main reason PEFs are flocking to the waste management market is the high entry barrier due to the industry’s status as a “licensed business.” As the importance of ESG (environmental, social, and governance) continues to rise, large corporations are also entering the waste management market, which is expected to further drive up company valuations. In addition, the steady growth of the related market makes it an ideal investment sector for PEFs, which aim to recover their investment after a certain period following an acquisition.

In a report, Samil PwC explained, "Due to the domestic recession, the environmental waste management market, which has infrastructure characteristics and is less affected by economic fluctuations and can generate stable cash flow, is regaining attention over consumer goods, which are more vulnerable and volatile to the economy."

The report continued, "As of the end of last year, domestic PEFs’ dry powder (uninvested committed capital) reached 37.5 trillion won, and the amount of dry powder that could not be deployed due to high interest rates is expected to grow even larger. As a result, investments in large-scale waste management deals, which allow for rapid capital deployment, are drawing significant attention."