Environmental firms steadily ease into the next stage of their development
FROM NICHES TO RICHES
There are advantages to being a niche firm, says Robert P. Stearns, president and CEO of Long Beach, Calif.-based SCS Engineers, a solid waste and hazardous waste specialist. Big multidisciplinary firms are “so large and so diverse that they’re going to lose focus on markets.” SCS, ranked No. 43 with $46.3 million in revenue, offers clients “more personalized service,” says Stearns. One such client is New York City, where SCS prepared closure plans and a landfill gas management plan for the city’s Fresh Kills landfill, scheduled to close in 2002.
American Ecology Corp. also is hoping to benefit from concentrating on a niche market—low-level nuclear waste. The firm turned in its best first quarter in a decade this year, says Joe Nagel, president of the Boise-based firm. Acquisitions on the chemical waste side did not perform as anticipated, he says, and the firm was forced to downsize, dump non-core subsidiaries and restructure more than $45 million in long-term debt. The retrenchment dropped American Ecology three slots among the Top 20 Nuclear Waste companies, to No. 17, but positions them well for the future. Laws must change, Nagel says, to enable American Ecology to take nuke waste at permitted sites such as the one it has at Richland, Wash. At present, only waste from an 11-sate compact is allowed. Nuclear waste is “a major issue out there [that] we have not faced as a society,” he says.
Nuclear business and consolidation have both been good for MACTEC, says President Scott E. State. The privately held, Golden, Colo.-based firm secured a cash infusion from Credit French Merchant Bank to fund acquisitions that doubled its size in 1998. The largest involved QST Environmental Inc., which ranked No. 63 on last year’s Top 200 list, one slot ahead of MACTEC
Pumped up MACTEC is No. 25 this year and ranked ninth among the Top 20 Nuclear firms, up four places from 1997. MACTEC made the leap by patiently attracting private equity investors, then leveraging its position to attract lenders. “In a consolidating market,” says State, “you have to have cash-flow financing. Public companies like it can put that together, but you don’t typically see privately held firms who are able to produce the kind of financing we have.” Nagel says the firm is looking to make even more acquisitions and move further up the Top 200 list. “Our objective is to be a Top 10 firm in the next three years,” he says.
Consolidation has been good for remediation contractor Sevenson Environmental Services Inc., as well. The Niagara Falls, N.Y.-based firm is doing better as the number of competitors shrinks, says Michael Elia, company president and CEO. Margins are improving, too, he says. Sevenson is winning one job in four these days, compared to one in 10 previously, says Elia.
If corporate cannibalism makes some companies disappear, it also creates space for newcomers—one-fifth of the Top 200 weren’t on the list last year. Many of them have developed expertise within a region or with a specific client base. Both characteristics hold true for the No. 200 firm, Locus Technologies. The Walnut Creek, Calif.-based company claims to be the largest groundwater consultant in Silicon Valley, boasting a client roster that includes Hewlett Packard and Fairchild Semiconductor.
High-tech clients are a good fit for a firm that is trying to leverage its own technology to bottom-line results, says President and CEO Neno Duplancic. “Most people are using the Internet to do research or buy something,” he says. “We have carried the whole thing one step further, to physically control systems around the world.” Locus develops Internet-based control platforms for pump-and-treat plants that enable an operator to work from a dedicated Website, an easy way to cut long-term o&m costs.
Federal expenditures inched forward for the Top 20 firms in that sector in 1998, showing a 4% growth rate above 1997. State and local municipalities picked up some of the slack, growing by 10%. At the federal level, Defense Dept. work is declining, several major contractors say. Remediation contracts actually fell 10%, according to her numbers, says Joan Berkowitz.
