Highlights from the Houlihan Lokey Conference with Houlihan Lokey’s Scott Sergeant

July 29, 2015

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John Shegerian: Welcome to another edition of Green Is Good. This is the Houlihan Lokey edition of Green Is Good, and we are broadcasting live from the 10th Annual Industrial Conference and the guy who put it together is with us himself, Scott Sergeant. Scott is the Managing Director of Houlihan Lokey. Welcome today to Green Is Good, Scott. Scott Sergeant: Thank you, John. And thank you for giving me credit for this great event, but our whole firm puts this together every year and I’ve got a great group of 75 investment bankers in our industrials group who all contribute to putting this great event together. John Shegerian: They’re all great people but I know Scott the best and Scott is my point of contact at Houlihan Lokey, so to me this is Scott’s event anyway, and Scott has been so kind and asked us to come speak at these events. This year you invited Green Is Good to come and interview some of the great speakers and other folks that have come and enjoyed this amazing event. We’re very appreciative of that, Scott, it’s been just a delight to be here and some of the speakers you’ve had just have amazing brands. Scott Sergeant: Yeah. Every year we try to carve out at least one track of presenters. This year we had over 50 presenters across a whole variety of different industrial subsectors, but because the environmental services is such a big practice for us, we have at least a track full of high quality public and private environmental services companies. John Shegerian: That’s great. And for our listeners and our audience out there that want to learn more about Scott and his colleagues and what they’re doing at Houlihan Lokey, please go to www.hl.com. You can learn about all the services that Houlihan Lokey does. Scott, this is the 10th Annual Industrial Conference. Talk a little bit about the evolution, how you started it and why you started it originally and how it’s evolved and how it’s now one of the premier – if not the No. 1 – industrials conference in the world. Scott Sergeant: Well, the reason why we think it’s the best industrial conference…. John Shegerian: Yeah. Scott Sergeant: Is because it’s very unique in that we have both public companies and private companies. It’s not just a public company institutional shareholder/investor conference where we link up investors with public companies. This is a conference where we try to bring all constituents, all potential stakeholders and businesses for just a massive networking event. So what’s really fun is we bring opportunities to companies that could be future lenders, acquirers, other types of investors or they could be target companies that those businesses want to buy at some point. And a lot of great new partnerships come about. Alliances. It’s just a great way for people to get their brands above the radar and networking to create better businesses. John Shegerian: So for investors that want to meet and hear good entrepreneurs doing really neat things this is where they’ve got to come. And for entrepreneurs that want to get their story out, is this also where they’ve got a platform then? Is that sort of the platform that you’ve created here? Scott Sergeant: Yeah, so this year we’ll see how many folks. We were expecting at least 600 to 700 attendees today throughout the course of the day. John Shegerian: Wow. Scott Sergeant: And like I said, 50-plus industrial presenting companies. John Shegerian: Wow. Scott Sergeant: So of those attendees it’s a cross between corporate executives. John Shegerian: Right. Scott Sergeant: Business owners, private equity sponsors, hedge funds, lenders, other transaction intermediaries, so it’s a pretty diverse group of attendees. So anybody who is interested in meeting any of these companies or just generally networking with any of those folks or are generally interested across all these different industrial sectors, yeah, this is the place to be. John Shegerian: Thanks to you – and I really mean thanks to you, Scott – Green Is Good was allowed in today to interview and meet some of the great speakers and leaders that come to share their stories here. We had Organix Recycling on Green Is Good and RiverRoad Waste and RWL Water and so many great brands. Can you share some of your highlights from today’s amazing conference and some of the brands that were here and some of the things that you got to see and go to help facilitate that really make you proud of today’s great event? Scott Sergeant: So we had four great public companies – U.S. Ecology, Waste Connections, Progressive Waste, Great Lakes Dredge & Dock – these are four of the bigger brands of publically traded environmental services companies. The environmental services industry is – depending on how you measure it – a $200-billion, $500-billion industry. There aren’t that many billion-dollar-plus companies, and they’re actually aren’t a lot of pure publically traded companies. We’ve got a good chunk of them presenting here today. John Shegerian: That’s a good point. Scott Sergeant: Plus, four great environmental services businesses. Electronic Recyclers at the top of the list. Organix Recycling – as you mentioned – leading the food recycling business. John Shegerian: Yeah. Wow. Scott Sergeant: What we call NorthStar Services that does a variety of environmental remediation, deconstruction, decontamination services across both commercial and industrial subsectors. They’ve got a leading brand as well. So we have just a really nice mix. But my highlight of the day is basically setting up one-on-one meetings for all our main guests. The presenting companies and other attendees, we try to match them up in the setting of what we call one-on-one meetings, so we look at our roster of attendees and we try to do some matchmaking of again trying to match people with buyers and sellers and investors and potential targets and just general strategic alliances. Just being able to sit in on some of these and be a fly on the wall and hear how corporate executives are thinking about growing their businesses is really the highlight for me. John Shegerian: Got you. And then how many potential investors and other types of strategics come to meet all these great brands and speakers that are here? How wide a net are you casting for the investor population? Scott Sergeant: We’ve got our client base, which is pretty deep in the financial sponsor community, and all their portfolio companies and all the corporate executives that are part of our industry coverage. We had – I think – somewhere of 1,200 people registered for the event. And, obviously, not everybody makes it. John Shegerian: Wow. Right. Scott Sergeant: But we expect at least 600 to 700 people of those to show up. John Shegerian: For our listeners who just joined us and our audience that just joined us, we’ve got Scott Sergeant. He is the Managing Director of Houlihan-Lokey. This is the Houlihan Lokey special edition of Green Is Good. To learn more about Houlihan Lokey or to hire them to help you in some banking need that you have, please go to www.hl.com. Scott, there are a lot of people in our audience both in the United States and around the world that aren’t familiar with Houlihan Lokey. Share a little bit about how big and deep your company is not only nationally but internationally and what kind of services do you provide in the banking community. Scott Sergeant: So we are a full service investment bank, and we are a global firm. So we’ve got eight offices across the U.S. We have several offices across Asia and Europe. Australia now. So we are – again – full service investment bank. We are purely an advisory firm. So we are not a bank that underwrites securities and the like and that lends money ourselves. We don’t have necessarily a balance sheet. We act as a financial advisor to raise capital, equity, debt or to match buyers and sellers. So we have the leading M&A practice. I bet you we do more M&A deals than anybody else under – you name a metric – $100 million, $500 million, a billion dollars, $2 billion in transactions. We are usually the No. 1, 2 or 3 in terms of overall the number of transaction volume. We also have one of the leading practices of raising capital for our clients. John Shegerian: Wow. Scott Sergeant: Again, both debt and equity capital for a whole variety of reasons. We also have a very large opinion and evaluation practice. We provide evaluations for really any conceivable kind of situation whether it’s transaction related or non transaction related – we can go into a bunch of reasons why you need those. Then we also have the leading financial restructuring practice. So if a company or a creditor was in an unfortunately circumstance where there is some financial distress, we act as an advisor to either side of either the creditor or the debtor in helping them figure out how to negotiate a resolution to really fix the balance sheet of those companies. Then, lastly, we do have a consulting practice where we basically do strategic advisory to help do studies and other research for firms who are trying to basically starting to build business plans and want their party to research around their industries. John Shegerian: Wow. Scott Sergeant: That’s a relatively new practice for ours as well. It’s very complimentary to all three of those investment banking practices. John Shegerian: And your specialty specifically is in the environmental services platform? Scott Sergeant: Yes. So that is the area that I live and breathe on a daily basis. About four or five years ago, we started our environmental services practice. And I have been with the firm for 14 years and specialized in M&A really – just doing deals across a whole variety of sectors – and then over time I had done a handful of environmental related transactions and decided that this was an un-banked area, one that is extremely fragmented and one that is really target-rich in the middle market, which is our focus as a firm. And it was an area that I developed a passion for personally, because you get to work with some great companies that are helping other companies stay environmentally compliant. John Shegerian: Right. Scott Sergeant: And just do the right thing. So it’s a “feel good” industry, too. So all those things combined, we did a lot of work around how we could build a practice that was a success that was going to really keep us busy. So that was about four or five years ago and we have – we’ve done about two dozen environmental services-related transactions over the last three years. John Shegerian: Wow. Scott Sergeant: And so we think we’ve got very nice market leadership there. John Shegerian: So your environmental services practice now has become one of the biggest environmental services banking practices in the United States, if not the world? Scott Sergeant: That’s what we think. Yep. John Shegerian: That’s awesome. Scott Sergeant: So there are a lot of deals that get done. It’s a highly fragmented space, but we’re very proud to say that we’ve been associated with a lot of the higher profile transactions in this space with a lot of the market leaders. John Shegerian: The social trends that are going on with the Millennial generation and the generation coming in behind them being really on fire for sustainability that has to bode well for your banking environmental services practice in terms of sustainability is here to stay, and there are going to be more and more companies growing up and needing banking services to service society’s now needs in terms of – as you said – food recycling, electronic recycling, textile recycling and just straight waste and other recycling verticals. Scott Sergeant: There are a lot of macro trends that support these businesses. Regulation has always been a big supporter. John Shegerian: Right. Scott Sergeant: Regulations continues to pile on every year. John Shegerian: Right. Scott Sergeant: You never necessarily know when the next regulation is coming. John Shegerian: True. Scott Sergeant: It’s not highly predictable but you can guarantee that it’s never going to reverse itself. John Shegerian: Good point. Scott Sergeant: It’s never going to get more relaxed. So that’s a very nice catalyst for growth but also a nice barrier to entry. John Shegerian: That’s a great point. Scott Sergeant: But at the same time, even though in the cases where they’re not forced to do the right thing, companies increasingly feel compelled to do the right thing and really focus on environmental stewardship because it is good business. People aren’t necessarily going to make decisions that are not economical for them but they’re certainly going to try to do the right thing and find a way to make money doing it. I think that overall increased focus on sustainability and environmental stewardship is a huge tailwind in the industry supporting all these companies. Another area is just businesses that have figured out ways to identify waste or garbage or whatever and really not call it “waste” anymore, right? John Shegerian: Right. Scott Sergeant: To find ways to keep it out of the landfill, which is what everybody wants to do, and identify those waste streams and then convert them into something valuable. Not necessarily putting it in a landfill and calling it a day. They are identifying that material, and it may be at the end of its useful current life, but then there’s another life for it somewhere else. John Shegerian: Right. Scott Sergeant: And then be able to make money on that product on the back end. John Shegerian: Wow. Scott Sergeant: So there are so many businesses that fit that category. The U.S. is obviously one massive, very large market but like the food waste and used motor oil, used cooking oil, used tires. John Shegerian: It’s amazing. Scott Sergeant: There are a lot of subsectors out there with really smart people that are creating these businesses and building scale out of them. John Shegerian: You know, Scott, hopefully, we are invited back for the 11th Annual Industrials Conference. Give me a little visibility on what you’re hoping is going to grow in the next year or so. What other areas have you not touched on that you’re excited to maybe explore or go after in terms of banking opportunities? Scott Sergeant: I think that there is a whole host of professional services out there, too. John Shegerian: OK. Scott Sergeant: So businesses that are helping companies deal with their waste streams. John Shegerian: Oh. Interesting. Scott Sergeant: Or advising them in terms of how to become focused on sustainability issues. John Shegerian: Oh interesting. Scott Sergeant: So whether they’re analyzing their waste streams or helping them find a home for their waste streams or helping them deal with the increased burden of compliance in general – whether it’s safety related, environmental related. Just being able to comply with all these complex regulations out there with the Clean Air Act. John Shegerian: Right. Scott Sergeant: It’s complicated of all regulations out there related to the environment. There is still – I think – an untapped market out there that – again – is a very highly fragmented area. We haven’t done a lot on – the upstream professional service has done some. I think there is one area that we would love to do more in I think that would be one. Yeah. John Shegerian: That’s awesome. Well, we hope to come back next year and we thank you again for this year’s invitation. For all our audience members out there, this has been the Houlihan Lokey special edition of Green Is Good, and of course, we have “Mr. Houlihan-Lokey” with ourselves right now, Scott Sergeant. He is the Managing Director at Houlihan Lokey, and to find Houlihan Lokey online and to hire them to help you in your banking needs, please go to www.hl.com. Scott, you are a sustainability superstar and you make the world a better place every day. Thank you for all you do. You are truly living proof that Green Is Good. Thank you again for everything. Scott Sergeant: Thank you, John.

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