Editor's Focus

Consolidation became a familiar word to recyclers in the mid and late 1990s. Investment bankers and other merger and acquisition (M&A) specialists worked feverishly within the solid waste and scrap industries in the 1990s, brokering deals that altered the landscape of both industries.

The swift pace of consolidation, it turns out, may have benefited the M&A industry more than the solid waste and recycling industries. No matter what one’s views on that, however, the pace of consolidation has now slowed, and it turns out that many of the results may be reversible. (Painful perhaps, for those “starting over,” but reversible.)

Less reversible than the recycling industry’s consolidation effects, however, may be those that have taken place within industries related to recycling. This includes not only the steel, aluminum and paper industries, but also service industries recyclers rely upon, such as transportation, insurance and lending.

One of the more visible aspects of these changes facing recyclers occurs at the corner bank branch. Without painting a simplified Norman Rockwell painting of the past, many small business owners (recycling and otherwise) used to enjoy a long-term relationship with a bank branch manager or other loan officer.

But a combination of endless acquisitions and new “career path” personnel programs within banks has greatly lowered the average stay of a bank branch manager. Banks have tried methods to provide stability to business customers, such as sending “personal bankers” out into the field to maintain contact with business owners. Often, however, the same revolving door combination of mergers, promotions and corporate defections prevents the personal banker from becoming a familiar face for more than a year or two.

The end result is that recyclers often have one more challenge added to the management of their businesses: the need to educate a new lending contact about what their business needs and how it functions. [New banker to scrap recycler: “Explain that again—your customers are not just steel mills, but also the ones you pay money to for material that they don’t want?”]

The lack of familiar lending industry faces has come at a time when many recyclers need a friend in the lending community. A couple of years ago, scrap recyclers were faced with lenders attuned to the “New Economy” who wanted to know if their scrap recycling company had an Internet strategy, and if not, why not.

Another concern of lenders has been caused by the failures of consolidated, publicly-traded companies. After a couple of high-profile credit watch warnings regarding recycling companies entering bankruptcy court, lenders began wondering about the viability of their own recycling business customers.

What may formerly have been explained with one conversation with one familiar lending contact may now involve a time-consuming and cumbersome exchange of documents that will travel well beyond the recycler’s area code. And as with the party game “telephone,” where a message gets continually altered as it travels through a line of people, the reasoning behind a small business loan request can easily get lost in the translation as it moves through a multi-stage approval process.

The increasingly global nature of business may be offering opportunities to recyclers. But the global consolidation also offers its challenges, with the loss of the reliable corner branch bank perhaps being among them.