How a National MRF Operator Repositioned Its Business Model and Sold at a Premium Multiple
Founder track record: This article reflects work led by netgainCFO co-founder Biff Jennings while serving as Chief Financial Officer of Hudson Baylor Corporation, a national materials recovery facility operator, before founding netgainCFO.
Most business owners who eventually sell their companies do not spend years building them around an exit. They are focused on running the business, serving customers, solving problems, and deciding where the next opportunity should come from.
That was certainly the case at Hudson Baylor.
Coming out of the 2008-2009 financial crisis, the recycling industry was dealing with tight capital, volatile commodity markets, and plenty of uncertainty. Many operators were pulling back. Hudson Baylor made a different decision.
The goal was not to sell the company. It was to determine what the company should become next.
At the time, I was Hudson Baylor’s CFO. The CEO initiated a formal strategic planning process and asked me to manage it. Working with the management team and an outside consultant, we looked closely at where the market was headed, what Hudson Baylor did particularly well, and where we had a genuine opportunity to grow.
What came out of that process changed the business.
A Decision to Go Deeper, Not Wider
One of the opportunities we considered was electronic-waste recycling. On the surface, diversification had some appeal. Once we dug into the market, however, the opportunity was less compelling than it first appeared. More importantly, it was not an area where Hudson Baylor had a clear competitive advantage.
So we passed.
That decision mattered. A good strategy is not only about choosing where to invest. It is also about having the discipline to say no when an opportunity does not fit the business.
Instead of moving into an adjacent market, Hudson Baylor chose to go deeper into something it already knew extremely well: municipal materials recovery facilities.
There was a clear need. Municipalities owned recycling facilities that needed to be upgraded for single-stream recycling, but many did not have the capital to make those investments themselves. Hudson Baylor had the operating expertise and could secure the capital.
That gap in the market created an opening for a very different business model.
From Operator to Long-Term Partner
Historically, Hudson Baylor might operate a municipality’s facility under an agreement lasting roughly five years. Under the new design-build-own-operate model, or DBOO, Hudson Baylor would design and finance the upgrade, own the installed equipment, and operate the facility under a much longer contract.
Those agreements could run 15 to 20 years.
That changed more than the length of the contract. It changed the economics of the business.
Instead of relying as heavily on short-term, volume-dependent revenue, Hudson Baylor was creating long-term contracted cash flow supported by assets it owned. The company was gaining something buyers and lenders both value: visibility.
A business valued primarily on this year’s throughput looks very different from a business with a decade or more of contracted revenue in front of it.
The Strategy Had to Be Financeable
Changing the business model on paper was one thing. Paying for it was another.
The DBOO model required Hudson Baylor to fund land, buildings, equipment, and facility improvements at a scale its existing financing arrangement was not designed to support. Simply adding more debt was not the answer.
I took the financing structure back to the market and solicited proposals from multiple banks for a facility that better matched what Hudson Baylor was becoming. We could explain exactly what the capital would support, how the new contracts worked, and where the cash flow to service the debt would come from.
That mattered. A lender can get comfortable with a capital-intensive strategy when the business model is coherent, the outcomes are defined, and the contracted cash flow supports the financing.
Despite pursuing a more capital-intensive strategy, Hudson Baylor’s debt-to-equity and leverage ratios declined between 2009 and 2011. The objective was not simply to raise more money. It was to build a capital structure suited to the business we were creating.
Financing was only one piece. Engineering capabilities had to grow. Plant operations had to become more standardized. The sales organization had to learn how to win a fundamentally different municipal relationship, one built around long-term ownership and operation rather than a short-term service agreement. At the same time, the company had to drive more material volume into the upgraded, higher-capacity facilities.
The strategy was not one initiative. The entire business had to line up behind it.
The Results Started Showing Up
Hudson Baylor stayed in the market while competitors were pulling back, and the strategy began to show results.
The company won every request for proposal it pursued during the period, including opportunities in Cape May and Atlantic County, New Jersey, Tucson, and renewals around the country.
Three facilities were ultimately executed under the new DBOO model: Atlantic County, New Jersey; Tucson; and Hudson Baylor’s own facility in Beacon, New York.
Between 2009 and 2011, revenue grew roughly 70% and reached a company record.
And then something happened that had never been the objective of the strategic plan.
A Buyer Called
ReCommunity had been watching Hudson Baylor’s progress and approached the company unsolicited. The owner was not looking for a buyer, but the offer created a conversation worth having.
Hudson Baylor ultimately sold at approximately 9x EBITDA at the end of 2011.
The multiple reflected more than the earnings the company had already produced. Several DBOO facilities were still coming online, and volumes from those in-development facilities were expected to rise nearly 50%. The buyer was not simply valuing the business Hudson Baylor was that day. It was valuing a platform that was positioned to scale.
The valuation is particularly notable in context. Around the same period, a vertically integrated operator several times Hudson Baylor’s size, with more than 20 landfills, was taken private at roughly 8.5x EBITDA. Landfill-heavy integrated businesses typically command some of the strongest multiples in the industry, while smaller, less asset-intensive businesses generally trade at a discount.
Hudson Baylor had no landfills. Yet its MRF platform commanded a multiple at or above that much larger integrated peer.
That is strong evidence that the market recognized the value created by the repositioning.
ReCommunity later became the largest independent recycler in the United States before Republic Services acquired it in 2017.
The Value Was Built Before the Deal
Looking back, the most interesting part of Hudson Baylor’s story is not that the company sold for approximately 9x EBITDA.
It is what happened before anyone was talking about a sale.
The company made a deliberate choice about where it could win. It walked away from a diversification opportunity that did not fit. It
changed its business model, found financing that supported that model, strengthened its operating capabilities, and built long-term contracted revenue.
The transaction came later.
For owners thinking about the eventual value of their businesses, that distinction matters. There is a meaningful difference between preparing a company to be sold and building a company someone wants to buy.
Hudson Baylor did the latter.
Enterprise value is created years before a transaction, in the choices about where to compete, the discipline to say no to the wrong opportunities, the operating and financial infrastructure built to execute, and the quality of the cash flow that results.
Thinking About the Next Stage of the Business?
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About the author
Biff Jennings is co-founder of netgainCFO. As CFO of Hudson Baylor Corporation, a national MRF operator, he led the strategic repositioning described above; the company reached record revenue and was sold to ReCommunity at a premium multiple. ReCommunity later became the largest independent recycler in the United States and was acquired by Republic Services in 2017.
netgainCFO provides fractional CFO and controller support to owner-operated and PE-backed companies in the environmental services, recycling, and waste industries, including quality-of-earnings and exit-readiness work through its valueX-RAY and valuePULSE services.