Business is picking up at garbage upstart Green for Life

theglobeandmail.com
Feb. 3, 2015
By Shannon Kari

Things were not looking good for Patrick Dovigi eight years ago.

The onetime Edmonton Oilers prospect had, at age 27, logged 2 1/2 years in the garbage business, running a transfer site north of Toronto.

But in April, 2007, his mentor, Romeo DiBattista Sr., informed him that his services were no longer needed. The DiBattista family, which had stakes in businesses as diverse as concrete-forming, meat processing, real estate and broadcasting, also sued Dovigi for allegedly misappropriating $673,000 in funds.

It was a good thing, then, that Dovigi had already thought about striking out on his own. “I made a lot of relationships in the industry over those 2 1/2 years,” he says. “I developed a business plan to build an environmental services company.”

Dovigi promptly launched Green for Life Environmental Inc. (GFL). Today, it is one of the fastest-growing waste management companies in the country, with operations in eight provinces, more than 1,700 employees and a recent round of funding from Wall Street-based investors. The company puts its value at about $950 million. It is active both in commercial pickup and in household markets where pickup is contracted out rather than handled by a municipality: GFL says it collects solid waste from more than one million households in Canada.

How did Dovigi pull off such a feat in a business that is dominated by giants like Progressive Waste Solutions Ltd. (formerly BFI Canada) and Waste Management Inc.?

For one thing, he had an ambitious streak dating back to his hockey heyday. Onetime St. Michael’s Majors teammate Dwayne Bateman, now an Edmonton car-dealership executive, remembers the young Dovigi impressing his teammates with his Hugo Boss suits. “We were thinking only about hockey. His mind was somewhere else.”

“I always loved hockey, I didn’t necessarily like the politics of hockey at times,” says Dovigi - the “politics” being the power that coaches and general managers have over players’ futures. “Hockey was a sport where you did not always control your own destiny. My aspiration in life was to control my own destiny.”

As he blue-skyed his future, Dovigi didn’t set his sights on going head-to-head with the giants, but rather on two ideas. One was the potential hidden in smaller waste-management shops - despite the heft of the majors, Statistics Canada listed 1,700 companies in the $6-billion industry as of 2010.

“There were a lot of mom-and-pop businesses that could be acquired,” says Christopher Payne, CEO of Hawthorn Equity Partners (formerly Genuity Capital), the first firm to raise money for Dovigi’s company. “Their children did not want to get involved. They wanted liquidity. If you buy enough volume, you can get leverage [comparable] to the bigger companies.”

Dovigi’s other idea was to offer bundled services, especially for commercial clients with both liquid- and solid-waste needs. “When you package the bundle and you make it easy for the customer, it makes more sense. Nobody was doing it,” says Dovigi.

One of the first potential investors Dovigi approached in 2007 was Barry Goldberg, a founding principal of Genuity Capital Markets. “I am not at all an expert in the environmental services business, but Patrick’s enthusiasm and passion were contagious,” says Goldberg, currently managing director at Canaccord Genuity Corp.

The discussions led to an agreement that Canaccord would raise funds for GFL through Genuity Capital, its private equity branch.

GFL went on to acquire nearly a dozen companies. As it grew, GFL also attracted more capital. In 2010, it received a $105-million investment from Roark Capital Group, an Atlanta-based private equity company. And in 2013 another $200 million was raised by issuing five-year unsecured notes.

Dovigi has had “a rocket ride to prominence,” says Mike Watt, acting chair of the Ontario Waste Management Association. “Patrick learned the business very quickly. Some people tend to look askance at that, but he has done a lot of the right things.”

Despite GFL’s rapid growth, the company’s profile was still relatively low until it landed a highly politicized job - a $186-million, nine-year contract to collect garbage from 155,000 homes in west-end Toronto. Toronto had generally resisted the growing trend among Canadian municipalities to contract out garbage collection, but a 2009 strike by unionized city workers helped catapult pro-privatization candidate Rob Ford into the mayor’s chair the following year.

GFL’s bid was nearly 20% lower than that of its nearest competitor, provoking skepticism about whether GFL could do the job at that price - and initially there were numerous service complaints.

However, the contract may end up being one of the only successful legacies of Ford’s term as mayor of Toronto. A city auditor’s report issued last year concluded that contracting out saved taxpayers $11.5 million in its first year, while providing satisfactory service. Savings in the second year were roughly the same.

The Toronto contract was important as a “branding” opportunity, says Dovigi, as GFL’s distinctive green trucks are now a familiar sight in Canada’s largest city. He insists the job is profitable and that GFL has been able to lower costs by typically using dual-stream trucks to pick up organics and garbage (or recyclables) in a single trip. (The city uses a variety of trucks.)

Still, the deal has not been without its hiccups. The company’s record of driving accidents lowered GFL’s safety rating in early 2014 and restricted the company from bidding on some municipal waste contracts in Ontario.

And the debate over privatization has not ended. Toronto councillor Gord Perks says taxpayers may not be better off in the long run. “Eventually, only one player will have a fleet of trucks and a work force. You may have savings on the first contract. The second, not so much. Ultimately, there will be a higher cost.”

In January, Toronto began delving into whether it should also hand east-side household collection to the private sector. “We will bid if the contract terms are similar,” Dovigi says.

In late November, GFL announced that Dovigi, who began as a minority shareholder, had “significantly increased” his stake in the company, although the terms were not disclosed. (GFL is privately held.) At the same time, Roark sold its share in GFL, while Highbridge Principal Strategies, a New York-based private investment firm, has acquired a non-controlling interest.

“We haven’t deviated from the plan,” says Dovigi, which is to double the size of GFL by 2019, without taking the company public. “I would rather manage the business over a three- to five-year term, than [manage it] quarter-to-quarter to make the shareholders happy.” Revenue, he says, is roughly $500 million annually.

The company’s growth has made its chief executive very wealthy. Dovigi owns two multimillion-dollar homes, including one near Casa Loma that overlooks downtown Toronto. As a “hobby,” he purchases, renovates and then sells luxury cottages in the Muskoka region.

As for the rift with his mentor Romeo DiBattista and his family, the two parties are still not on speaking terms. The allegations, denied by Dovigi, were never tested in court and a confidential settlement was reached. Says Dovigi: “They went their way and I went my way.”

How Green for Life grew (acquisitions 2008-14, from west to east)

1. Edmonton/Slave Lake, 2014

Tri-Line Disposal Inc. and Deuce Disposal Ltd., purchased for $72 million

2. Calgary, 2014

The Garbage Company Inc.

3. Winnipeg, 2010

Enviro West Inc. (liquid waste)

4. Brantford, 2011

OSS Environmental (liquid waste)

5. Bradford, 2011

Lotto Sanitation (liquid waste)

6. Toronto, 2011 Turtle Island Recycling

7. Pickering, 2008

Direct Line Environmental Corp.

8. Ajax, 2009-10

National Waste Services

9. Atlantic Canada, 2014

Some landfill and collection operations of Waste Management, purchased for $39 million (U.S.)