Flush with an injection of debt finance, market leader could be setting out on the acquisition path, writes Arthur Beesley, Senior Business Correspondent

Greenstar aims to double its annual revenues to €200 million within three years, according to chief executive Steve Cowman. Already the biggest beast in the waste business, the waste unit in National Toll Roads (NTR) aims to build its 8 per cent market share rapidly as the industry consolidates.

A man who built his career in the world of high-tech multinationals, Cowman says the injection last week of €200 million in new debt finance will give Greenstar "sprint capacity" as acquisition opportunities emerge.

Reluctant as he is to disclose Greenstar's shopping list, Cowman says the company will run the rule over big players such as Advanced Environmental Solutions, Oxigen or Thorntons should they come on the market within the next year, as expected.

Buying one or other of these groups would bring in additional revenues of €40-€50 million, going a big step of the way towards the €200 million target.

But it is only with the help of smaller deals and organic growth that this particular ambition will be realised. The industry's fragmentation is a help. With more than 400 companies of diverse scale in business, opportunities are plentiful. To that end, he says Greenstar is currently finalising three smaller deals in the midlands, Munster and the North. "Their turnover at the moment is anywhere between €3 million and €9 million each," Cowman says.

With capital expenditure of some €170 million since 2003, €50 million of it on acquisitions, he adds that Greenstar has fought hard to maintain profit margins in the "low-teens". That implies after-tax profits last year of €11-€12 million.

"Some companies, when they're in an acquisition mode, will live with lower margins. We've continued to drive both top line growth and profitability over the last few years. It's an ongoing challenge in terms of continuing to do that."

After 15 years with electronics groups such as Philips, General Electric and Volex Europe, Cowman sees obvious similarities between the consolidation of the waste industry and the semiconductor business from the mid-1980s. Similar, too, was the consolidation of the cement business as the CRH empire evolved.

"Over a period of 20 years the semi-conductor industry consolidated. You ended up with a couple of very big players ... and a couple of niche players who had very specific technologies or specific applications. The customers ended up shaping the product offering," he says.

"The cement industry was exactly the same. And to be perfectly honest, that's the opportunity that NTR sees. We see a fragmented market. We see that we've had first mover advantage and we're trying to build on that as we go forward."

While waste was never the business of choice for people who don't like to dirty their hands, Cowman says the sector is characterised by increasing professionalisation as big companies grapple with more stringent compliance guidelines and the rising cost of waste management.

Yet if waste was never a top priority for Cowman during his time in multitnationals, he says it was his experience of that world that drew NTR to him.

"Why would you pick someone from a multinational environment whose background is in electronic engineering, semiconductor process? The way they sold it to me at the time was that that is the profile of most of our big customers and what we want to do is we want someone to come in and bring in competitive best practice, apply it to an industry that's very embryonic, very environmental and kind of primitive really."

If NTR's backing is always going to give Greenstar an edge in any takeover process, Cowman won't comment on the likelihood or not of the parent company taking out a listing on the stock exchange.

On takeovers, he says timing and a sense of a "courtship ritual" are important, particularly when seeking to buy out family-owned companies where emotional as well as financial considerations arise.

He also says the waste business is more complex than it might appear at first glance, particularly given the slow pace of the planning process.

"I joined the company 2½ years ago. My background is in electronic engineering. I've worked in the multinational environment here and overseas.

"When you've come from designing and manufacturing semi-conductor devices and put that into high-end companies and you walk into the waste space, you think how difficult can that be? And when you walk in, you find out that it's very difficult."

Particular concern arises around the choice of technology, he says. "What's happened is that there are a multiplicity of technologies for sale out there. Some of them have real value but there's a lot of snake oil salesmen as well. There's a lot of technologies that are being offered that are untried and untested.

"If they work they offer huge potential, but there's huge investment. And in Ireland you have a problem as well where it can take four or five years to get planning. What that means is that you've got to be very, very careful about the technology. You've got to be sure that it works not just today but in five years' time."

On the politics of the waste debate, Cowman has several points to make. He is unhappy that Greenstar competes with dumps run by local authorities, which also have a role in regulating that part of its business.

With such a conflict of interest in mind, he says local government should withdraw from the business or "give up regulation" and hand over such work to the Environmental Protection Agency.

As for national government, he praises recent efforts to step up enforcement activity against illegal dump operators. Still, he criticises the Government's reliance on incineration as the "panacea" to the shortfall in the supply of waste disposal facilities, and says the new Critical Infrastructure Bill should go further to expedite the scrutiny in the courts of planning appeals.

"There's a lot that has been bet on incineration here. Incineration is presumed to be a significant solution in the future for the disposal of waste . . . In any professional integrated waste policy, there is a role for incineration, but you can't incinerate everything," he says.

"As a short- or medium-term solution to disposal in Ireland, it's just not going to happen."

Crucial here is the fact that the three incinerators already in planning - in Cork, in Carranstown, Co Meath, and in Ringsend, Dublin - will have capacity only for 10 per cent of Ireland's waste. Add that to the looming closure of "one-third" of landfill capacity in next three years, and capacity seems all the more constrained.

In addition, the looming implementation in 2010 of the EU Landfills Directive will impose "draconian" fines on Ireland if infrastructure to separate and convert organic waste into compostable material is not made available.

Cowman has €200 million in his kitty to exploit the commercial opportunities that may arise from such constraints on supply.

However, he says failure to address the absence of proper facilities for companies with a big demand for waste services could damage competitiveness.

"We don't have infrastructure in place that a lot of these companies want [ in order] to really get world-class results."