The Early Days of Scaling GFL Environmental

Former VP at GFL Environmental

Why is this interview interesting?

  • Insight into working with Dovigi from $40m to $400m
  • Why revenue per truck per day is the best internal KPI
  • Dovigi is great with people and recruited the best in the industry to join GFL
  • Patrick was unique by moving into soil remediation and infrastructure
  • Why the infra spin-out could become a mini-GFL


Executive Bio

Fernando Pellegrino

Former VP at GFL Environmental

Fernando has over 30 years experience in the waste industry and was the right-hand man for Patrick Dovigi in the early days of building GFL. Fernando ran operations for GFL and helped Patrick scale the company from $40m to over $400m by rolling up mom-and-pop waste companies. Prior to GFL, he ran Ontario for Waste Management.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Can you share a brief background to your history in the waste industry?

I started in 1996. My wife Alida was a commercial banker and one of her customers, Duall, got bought out by Sanifill, a large US waste company, the first one to enter the Canadian market. I had an interview with a Texan named Brett Sarbor who was the business developer, who hired me on the spot as the scale guy, which lasted two days. The IT guys came from the States, and this was more or less when USA Waste and Sanifill merged, to create what we would know as Canadian Waste Services which became Green Waste Management as we bought out Burgundy Waste Management.

They needed someone to drive them to all these new locations that USA Waste/ Sanifill were buying in Ontario, and I had my license and so I was driving these IT guys around and watching what they were doing. Many things didn't make a lot of sense. I had a marketing degree and went to university but had no practical experience, and they were looking at me strange going, that made a lot of sense. By the time they were done within a week, I was now part of the IT team. For eight months, I flew across the US and Ontario, installing new point of sales systems, which are obviously very important. Landfills and transfer stations were part of the training development of the software. Unfortunately, they were firing all the Laidlaw and Phillips people from the acquisitions. I just had my first child and needed to go home to my wife who was alone and in tears as I was gone for four or five days a week.

They threw me into this white elephant company down in South Toronto, near downtown which was losing so much money. I still knew nothing. Ford was their biggest customer and I remember Rod Proto was the chief operating officer of the new Sanifill USA Waste merger. He was looking at me and was really disappointed; the place was a disaster. Equipment was always breaking down and he said, wow, this place is quite a mess. My operations manager told him it had been a lot worse, but he didn't say a word. The disappointment on his face said it all. All of a sudden, bells went off in my head and I realized we were doing something wrong. Everybody was saying, we make money, let's keep doing it the same, but because I didn't know any better, I started changing the way waste was always done. I looked at things nobody ever looked at before. Why are we using a trailer with only four axles instead of six? Four is only 28 tons of load whereas six is 36 tons. Next thing, I look like a hero and I got another district and the long-haul business and we did really good there and I have never looked back. It's that simple.

Why are there so many smaller local companies in this industry?

It's an easy business to get into; you only need a roll off truck, a few bins, and to know some people. You pick up waste and bring it to a transfer facility or landfill if there is one close by. People have a hard time understanding their own business but when it comes to the waste part of their business, they are all experts. Everybody knows and cares about waste; it's fascinating and you're right because there are so many mom-and-pop stores. The original strategy of all these big companies was to consolidate all these mom-and-pop companies. Except that as soon as you bought one, another one would pop up.

What is driving the consolidation in the market?

Density. When you buy a mom-and-pop shop, their coverage is the same as the big guys, but the big guys have way more trucks. So they're traveling 125 kilometers as their customer base is within that range, and not getting the maximum out of their equipment. When you buy that mom-and pop-shop, you now have two trucks in this area and two trucks in that area and are much closer to the transfer stations or landfills, which is more efficient. The waste pie is so big and the total dollars do not change. Landfills make the biggest margin, but that pie never changes until you get to GFL.

You said that another mom-and-pop would pop up when you acquire one, did that truly happen? Did you not see the number of companies declining over time?

We did, but after their five year non-compete was over, their uncle, cousin or sons would open up other businesses. Their challenges remained the same; trying to cover the same area with less equipment, so they only ever got their small customer base back. By then, you have consolidated so much and your routes are so dense, it doesn't matter if they nibble. When it comes to the mom-and-pop – and I don't mean to disrespect them whatsoever – but it's a race to the bottom. When you get larger, you start understanding there is real value in those assets and you need a return on them. If you have investors giving you money, there's room for everybody to exist. You need the mom-and-pop shops, but you also need big companies and best practices, which is why Waste Management, Waste Connection, Republic, Suez and Veolia in Europe exist; everybody has a spot.

We can talk about route density and M&A later, but how did you first get involved with GFL?

I was a district manager out of Waste Services, who merged with BFI and then became Waste Connect. I devised a plan with my boss Ross, to use certain under-utilized assets in both companies. We closed down some facilities and it was fantastic. That caused WSI to sell because Waste Management would control the tons WSI had, and a large company's worth is the tons it controls. The more tons it controls, the bigger the multiple of that company. As soon as BFI saw we were tying up our tonnage with Waste Management for five years, my boss and I both said, it will never happen with Waste Management, they will come to a deal, and I probably would be out of a job because I was a senior person making too much money.

The first phone call I got when BFI and WSI merged, was from Patrick Dovigi, who I had met while he was cleaning up a site, which was his first avenue into the waste business. He befriended a gentleman that was worth a lot of money and they owned a property which they had rented to some bad players in the market, and filled it with waste. The property was worth a lot of money and the Ministry came down on the owner of the land and said he had to clean it up. That is how Patrick and I met for the first time; he was 32 years old at the time. He knew nothing and the Ministry hired a third party to take care of the cleanup, charging them a crazy amount of money, and I told Patrick that he didn't have to do that. This is what it costs, let me clean it up with Waste Management, we will save you a bunch of money. Once WSI and BFI merged, he said to me Friendly Fernie, you're getting let go; you need to come and work for me. I call him PD for Patrick Dovigi, and I said, I appreciate the offer, I know I'm getting let go, thanks for the heads up, but I feel I can take some time off. I took four months off but he kept on calling me. He hired me and for three years I was his right-hand guy and we grew the company from $40 to $400 million. He is a super guy; I have nothing bad to say.

What attracted you to eventually join him?

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The Early Days of Scaling GFL Environmental(February 23, 2022)

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