More waste management companies are being put up for sale as their owners capitalize on strong growth potential and a stable business environment, with medical waste management emerging as a key mergers and acquisitions (M&A) market.

Shinyoung Securities expects the South Korean waste management industry to grow to 23.7 trillion won ($21 billion) in 2025 from 16.7 trillion won in 2018, as it is less cyclical than other sectors and has a high entry barrier, which contributes to the generation of stable profits.

The country’s medical waste management market has also seen rapid growth in recent years. According to data from the Ministry of Environment, medical waste more than doubled to about 219,000 tons in 2017 from about 91,000 tons in 2008. The cost of burning waste has risen from 513,000 won per ton in 2010 to more than one million won in 2019.

KKR completed the acquisition of medical waste management company ESG Group, including ESG Gyeongju, ESG Gwangju, ESG Gyeongsan and ESG Logis, from Anchor Equity Partners for 875 billion won. More recently, Affirma Capital offloaded EMC Holdings to SK Engineering & Construction for about 1 trillion won.

In June, Macquarie Private Equity sold Koentec and Saehan Environment for approximately 510 billion won ($452 million), or a multiple of about 14 times on enterprise value (EV) to earnings before interest, taxes, depreciation and amortization, to a consortium of IS Dongseo and E&F Private Equity. 

Medical waste management company DDS, which is located in Nonsan, Chungcheong Province, was sold to Eugene Private Equity and Korea Development. More recently, Changkwang in Cheonan, Chungcheong Province, and Arim Environment in Goryeong, Gyeongsang Province, have been put up for sale.

Seven of the 13 designated medical waste incineration facilities have either been sold or placed on the market. Successful sales of Changkwang and Arim Environment may pave the way for further deals involving waste management companies.

“As valuations of waste management companies rise, owners of privately-held firms start to put them up for sale,” said an industry source. “If this trend continues, other waste management firms are highly likely to be up for sale as well.” (Reporting by Se-hun Jo)