Latest / The Buyer & Seller Podcast with Fexingo: Business Brokers, Exits, and Private Sales Explained / How a Waste Hauler Sold at 70x EBITDA with Municipal Contracts
Transcript
- Lucas: So a regional waste hauler in the Midwest sold a few weeks ago for 70 times trailing EBITDA. Not a typo. Seventy times. Luna: Okay, I need to hear the story behind that. That's more than double some of the multiples we've talked about on this show. Lucas: Yeah, and look, if these conversations have moved your work forward in some small way — maybe you're thinking about your own exit differently — a handful of listeners chip in monthly at buy me a coffee dot com slash fexingo, and that's literally what funds making this many of these. Luna: It's true. No ads, no sponsors, just people who find this stuff useful. Keeps it honest. Lucas: So back to the waste hauler. The company had 12 trucks, about 18 employees, and it serviced three small towns in Indiana under exclusive municipal contracts. Those contracts had an average remaining term of nine years. Luna: Nine years of locked-in revenue. That's the kind of visibility buyers dream about. Lucas: Exactly. And the contracts were structured with automatic annual price escalators tied to the consumer price index, plus a fuel surcharge pass-through. So the buyer wasn't taking inflation risk or commodity risk. Luna: So effectively zero revenue volatility. That's worth a massive premium. Lucas: Right. The business did about $2.4 million in revenue, with roughly $900,000 in EBITDA. So at 70 times, we're talking a $63 million exit for the owner. Luna: And who bought it? Lucas: A mid-market private equity firm that already owned a larger waste platform in the region. They were buying density — the route economics in waste hauling are brutal if you're driving trucks empty, but these three towns were contiguous and fit perfectly into their existing network. Luna: So the buyer wasn't just buying cash flow. They were buying synergy. Lucas: Exactly. The buyer estimated they could cut the acquired company's operating costs by 30 percent by routing the trucks through their existing depot and consolidating back-office functions. So the effective multiple they paid on the post-synergy EBITDA was much lower. Luna: That explains how they justified the price. But still — 70 times is extreme. What's the typical multiple for a small waste hauler? Lucas: Usually between 8 and 12 times for a non-contract, residential route business. Maybe 15 to 20 if they have some commercial contracts. But the municipal contract layer — that's the multiplier. Luna: Because municipalities rarely switch providers. The switching costs are huge — rebidding, public hearings, union considerations. Lucas: Right. Once a town signs a 10-year waste contract, they're not breaking it. So the buyer gets a bond-like revenue stream with a growth kicker. Luna: How did the owner get those contracts in the first place? Lucas: He started the company in 1998 with one truck, doing residential pickup in a single county. Over time, he built a reputation for reliability — never missed a pickup, even during snowstorms. When one town's contract came up for rebid in 2005, he undercut the incumbent by 15 percent and won it. Then he used that reference to win the next two. Luna: So the contracts weren't just luck. He deliberately built a track record that made him the safe choice. Lucas: Yeah. And he also structured the contracts to be renewal-friendly. Each contract had a clause that if neither party gave notice 18 months before expiration, it automatically renewed for another five years. That's why the remaining term was so long — the towns had essentially auto-renewed multiple times. Luna: That's a masterclass in locking in recurrence. Lucas: It is. And it's a lesson for any service business owner: the more you can make your revenue sticky — through contracts, through data, through switching costs — the higher your multiple. Luna: We've seen that with pool routes, with pest control, with commercial laundry. But this waste hauler case really drives home the power of municipal contracts specifically. Lucas: Because the counterparty is a government. They have tax revenue, they have bond ratings, they almost never default. That credit quality gets priced into the multiple. Luna: Did the owner have any other assets that added value? Like the trucks or the depot? Lucas: The trucks were worth maybe $1.2 million on the used market. He owned a small depot on a half-acre lot, probably worth $400,000. So the hard assets were a rounding error compared to the contract value. Luna: That's wild. The business was essentially a collection of paper — the contracts — with some trucks attached. Lucas: Exactly. And the buyer was sophisticated enough to recognize that. The sale process was competitive — three PE firms bid. The winner paid 70 times because they saw the highest synergy and the lowest risk. Luna: So what's the takeaway for someone listening who runs a service business without municipal contracts? Can they still aim for this kind of premium? Lucas: Unlikely to hit 70 times, but they can replicate the principle. Any multi-year contract with a creditworthy counterparty — think school districts, hospitals, large corporate campuses — will lift your multiple. The key is the remaining term and the automatic renewal mechanism. Luna: And the data that proves the contracts actually renew. Lucas: Right. The seller in this case provided a 10-year renewal history showing 100 percent retention. That's the kind of proof that makes a buyer comfortable paying up. Luna: Any advice for someone who wants to start building that kind of contract stack? Lucas: Start small. Go after one municipal account — maybe a small town or a county department — and over-deliver for two or three years. Then use that reference to get the next one. The compounding effect is real. Luna: And be patient. The owner in this case took 25 years to build those three contracts. Lucas: Yeah. But when he sold, he didn't just sell a business. He sold a 25-year track record of reliability, locked into paper. That's what 70 times buys.