Specialty waste and environmental services provider Denali Water Solutions LLC of Russellville is in growth mode, having announced six out-of-state buys in less than a year.
Those acquisitions deliver the permits and business relationships in places where the company didn’t have a presence before, said CEO Andy McNeill, who has had an ownership interest in Denali since it was formed in 2014.
They also followed another deal, but with the company on the other side of the M&A equation. TPG Growth of San Francisco and Fort Worth, Texas, bought Denali in January 2020 from The Firmament Group, formerly known as McLarty Capital Partners. TPG Growth manages approximately $17.7 billion in assets.
McNeill is looking to build Denali into a billion-dollar company. It is in the process of issuing public debt and has about $400 million in annual revenue, he told Arkansas Business. He said its revenue has grown by a factor of at least 10 since 2014.
While the company isn’t planning to go public, that is an option it will look at as its revenue continues to grow, McNeill said.
“As we create more growth, and we get bigger, one of the options on the chessboard is using public capital as opposed to private capital,” he said. “We’re probably, you know, maybe 50% of the way there in terms of size before I would say, you know, the public markets become realistic.”
What Denali won’t be is a penny stock incapable of attracting the attention of larger investment firms, McNeill said.
The company has also grown its workforce, from 50 in 2014 to between 1,300 and 1,400 today, he said. The largest concentration of its employees, a couple hundred, are in Arkansas.
A Simple Formula
What Denali does is handle various sludges — predominantly it deals with the byproducts of cleaning water — for municipalities, food processing plants, paper and pulp mills, grocery stores, restaurants and other large industrial facilities.
“It’s a really simple formula. We try to go into the plant, and we do services for our customers where we clean out their systems. We don’t just haul away and repurpose waste,” he said, noting that it clears sludge on a regular basis from ponds that water and wastewater plants use in their cleaning processes.
Denali takes what is “called biosolids because it’s biologically digested; it’s not actually raw human [or animal] waste. … And we handle this in thousands and thousands and thousands of truckloads all over the United States. And what we do is we take this stuff, and we do two different things with it,” McNeill said.
The company either uses the biosolids as fertilizer on farm fields or, in densely populated areas, composts it. The company has composting facilities in New York City, Connecticut, Michigan, Florida, Arizona and New Jersey.
Denali’s work is all about avoiding dumping biosolids in landfills. Instead, the company disposes of biosolids at sites that are generally near where the biosolids were produced, McNeill said.
He acknowledged that neighbors have complained about the smell that is an inevitable consequence of biosolids disposal. But his company aims to dispose of waste responsibly and at a fair price, and to be a good community partner, he said.
“We sort of think about ourselves as environmentalists in a lot of ways, even though environmentalists may scoff at that because we’re industry waste guys, but we think we’re doing a good thing,” McNeill said. “Denali didn’t create this waste. It’s not us doing it, right? And, unless you want it to be dumped in the rivers or something, it’s got to go somewhere. It’s matter. It can’t magically disappear. Your choices are you could put it in a landfill, I guess. But that’s not really a great option, either.”
Earlier this month, the Alabama Department of Environmental Management ordered Denali to stop spreading waste at an old coal mine north of Birmingham because of what department spokesman Scott Story called a simple issue of paperwork, which is now due on Tuesday.
McNeill declined to comment on the order.
The action was prompted by odor complaints and concern from environmental groups over the waste reaching a fork of the Black Warrior River. But regulators told The Associated Press they found no evidence the waste had reached nearby streams.
In addition to the most recent order that cites two violations, the state of Alabama has notified Denali of eight other violations at four sites that date back to October. Alabama’s environmental department has regulated companies like Denali for less than a year, Story said.
“So there’s a little bit of a learning curve for everybody,” he said. There have been similar violations by other companies although none that warranted a cease-and-desist order like the one Denali received, Story said.
Denali has quickly responded to each violation notice. Only the two most recent violations prompted a cease-and-desist order.
Also, the agency has received 10 complaints concerning Denali in the past six months.
Dots on a Map
In the past year, Denali has acquired:
► Jesse Baro Inc., a municipal and industrial environmental waste transportation company headquartered in Douglassville, Pennsylvania;
► Organics recycler New Earth Inc. of San Antonio and Houston, which was acquired through Denali Water Solutions’ wholly owned subsidiary, WeCare Denali LLC;
► Recyc Systems Southeast LLC of Columbus, Georgia, a provider of transportation and land application services for industrial food processing residuals and municipal biosolids, predominantly in Alabama and Georgia;
► Madden Brothers Inc.’s compost, mulch and soil operations in Brunswick, Ohio, in January through its wholly owned subsidiary, WeCare Denali LLC;
► Veris Environmental LLC of Limon, Colorado, a residuals management services company that provides biosolids recycling and transportation, dewatering, digester cleaning, lagoon services and sediment removal and land application services in the western United States; and
► AWS Dredge LLC of Smithfield, Utah, a service provider to hard rock mines in the western United States.
The Jesse Baro deal was announced earlier this month. The Veris Environmental and AWS Dredge deals were announced in October, while the rest were announced in January.
McNeill thinks of these and companies Denali may buy in the future as dots on a map.
“If we don’t have a dot, then we could go in your four walls of your plant and help you do something. But we can’t move waste around if we don’t have a way for us to dispose of it through a permit,” he said. “There’s so much fragmentation in our marketplace. We’re basically targeting different dots, if you will, in different states. So somebody will have either a permit or a customer or a contract or facility that we think is accretive to us.”
In addition, McNeill said some of these companies may handle one type of waste but not have the expertise in or know how to talk to an industry to break into other lines of business. So “we’ll be able to typically create growth on top of those acquisitions because we have a broader go-to-market strategy,” he said.
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