What Types of Companies Might Invest in the Electronics Recycling Industry?

The universe of potential acquirers for an electronics recycling business spans multiple sectors, with varying degrees of strategic fit. For example, a competency in electronic product collection is attractive to a firm seeking to expand or acquire capabilities in reverse logistics -- broadly defined as the reuse of products or materials.

However, in instances where the e-cycler is reselling parts or remanufactured products, they must also understand important forward logistics capabilities such as customer service, merchandising and even retail elements relating to the target’s customer base.

There are several categories of compelling strategic acquirers that could look for investments in the electronics recycling industry, including:

• Diversified Waste Services: The traditional waste services industry is highly consolidated, and large competitors are now seeking new avenues of growth. Most waste services providers have a strong competency in the recycling of commodity materials such as paper, metal and glass. An electronics recycling acquisition would open access to new collection channels and customers. However, the labor-intensity of electronics recycling and a different customer base served by demanufacturing or remanufacturing operations may not be familiar to this group of potential acquirers. Examples in this category include Waste Management and Republic Services.

• Technology Lifecycle Management: These companies often have production capabilities with a focus on both demanufacturing and remanufacturing. They have a strong competency in logistics services and data clearing, with a desire to expand reverse logistics and collections. Customer relationships tend to be with users of technology, such as corporations or government agencies. Examples in this category include private equity-owned Intechra Group and TechTurn.

• Electronics Manufacturing Services (“EMS”): EMS providers have very robust manufacturing capabilities focused on electronics production and repair/refurbishment for original equipment manufacturer (OEM) customers. Although these OEMs relationships have potential to create some market conflicts, more and more EMS companies are seeking to gain competitive advantages through reverse logistics and end-of-life product services. Many also have environment-focused initiatives that would benefit from a “green” acquisition, like electronics recycling. Examples in this category include Jabil Circuit and Flextronics International.

• Third Party Logistics Providers (“3PL”): 3PLs specialize in forward supply chain solutions and are increasingly interested in reverse logistics as an area of growth. Historically, several 3PLs have maintained repair operations within their facilities, but most covet their asset-light business models and are unfamiliar with merchandising dynamics. Therefore, 3PLs would likely be more interested in brokerage of e-waste rather than the demanufacturing and remanufacturing aspects. Examples in this category include New Breed Logistics and CEVA Logistics.

In addition to these types of companies, financial acquirers are also an important category, given the platform nature of an electronics recycling business model and the multiple runways for future growth. The combination of multiple categories of potential acquirers with the exciting growth outlook in reverse logistics and “green” services should continue to drive further consolidation in the electronics recycling industry. Rob Brown.

The author is a managing director and co-head of the Business Services group of Lincoln International, www.lincolninternational.com, a global mid-market investment bank. He has extensive experience providing mergers and acquisitions advisory services to leading companies and private equity groups.