By Paul Ploumis (ScrapMonster Author)

March 31, 2016 02:57:59 AM

SPOKANE (Scrap Monster): According to David Daoud, Analyst at Compliance Standards LLC, mergers are likely to pickup in the Information Technology Asset Disposition (ITAD) and electronic recycling sectors. The deals are likely to take place among companies that are already in the ITAD space, rather than from outside the sector.

The first decade of the 21st century witnessed immense growth in the ITAD and electronic recycling sectors. A large number of companies with financial backing from venture capital funds entered the space during this period. The shift towards greener IT industry accelerated the investment drive. However, the global financial crisis during 2008 hit the industry badly. The sector rebounded after two years with increased number of mergers and acquisitions, both from inside and outside of the sector. For instance, major firms including Arrow, Ingram Micro and Sims announced addition of ITAD to their existing portfolio of services. Also, outside firms showed increased interest in getting into ITAD services.

However, the M&A activity in the sector has witnessed sharp slowdown, mainly on account of the weakness in commodity market. The drop in prices of recovered metals has made electronics recycling process unprofitable for many facilities around the world. The two-year period also witnessed closure of several e-waste recycling facilities.

The future, obviously remains bright, said David Daoud. Financial firms have started showing interest to invest in companies that have a clear long-term view of the business. Recent acquisitions indicate that growth opportunities still exist in the sector. Late last year, Sage SE had announced acquisition of Hugo Neu Recycling in a bid to strengthen its core operations. Another example is the acquisition of the U.K.-based Dataserv Group by Singapore-based TES-AMM.

According to David Daoud, mergers are likely to dominate going forward. The trend is likely to sustain at least until 2018. However, it will be dominated by joining together of companies with in the sector. Large outside companies may have limited role to play, he added.