We are focused on sort of a healthy balance between sort of densifying tuck-in M&A, EPR spend, as well as just a natural delevering course. I think we said – this is the time – this is also actually the time you want to deploy dollars. I mean, when you have private equity and infrastructure funds, et cetera, are sort of sitting on the sidelines because their ability to finance these transactions at attractive rates with attractive leverage levels has become tougher, as the banks have tightened up and as the loan market has tightened up. So it’s really left a pretty good wide open market for strategics and put us in a very good position, similar to like GFL. Do you want to buy GFL, when it’s trading at 15 times or 16 times or do you want to own GFL, when you can buy it at 11, right?
So in theory, you should be buying it at 11. But when people are fearful, they’re not buying anything. And I think that’s a similar dynamic that’s playing out in the M&A market now because of the – that drop around the leveraged finance market for non-strategics.
Walter Spracklin: That’s awesome. I appreciate the color, as always.
Patrick Dovigi: Thanks, Walter.
Luke Pelosi: Thanks, Walter.
Operator: Thanks for your question. Our next question comes from the line of Stephanie Yee with JPMorgan. Stephanie, your line is now open.
Stephanie Yee: Hi, good morning.
Patrick Dovigi: Good morning.
Stephanie Yee: Can I clarify on the $210 million of M&A rollover in 2024. Does that include the four acquisitions that you’ve already done post the third quarter?
Luke Pelosi: Yes. That’s right, Stephanie. When we updated – I think we said in the press release, $325 million of acquired revenue. If you recall from Q2, that was about $50 million, implying about $275 million acquired post Q2. There’s roughly $200 million in Q3 and approximately $75 million post Q3. And that $210 million is the accumulation of everything we’ve acquired this year.
Stephanie Yee: Okay. Great. And just could you talk about the recent activity trends you’re seeing in your different lines of business, so resi, industrial, post-collection, any changes in kind of the cadence of activity in recent months?
Patrick Dovigi: No. There hasn’t been much, I would say. I think the biggest – I’d say, the only main impact we’ve seen is around – is really just around sort of large urban markets, particularly around sort of the small amount of C&D open roll-off container collection. I mean, we’ve seen that dip off in some of the larger markets in Canada, not as much in the U.S. And again, some special weights, particularly around soil volumes, et cetera. But other than that, it’s been pretty much status quo.
Luke Pelosi: And Stephanie, I think that’s in part a testament to the market selection, you’ve heard us speak a lot about this. I mean, the secondary market focus and a lot of the concentrate in the faster-growing areas of the U.S. Southeast, I think, bodes well for us in terms of that sort of volumetric growth. So although we’ve maintained, I think the guide is about a negative 2% overall negative volume for the year, it’s really 210 basis points of shedding and exiting non-core with underlying positive sort of volume growth. So yes, C&D related stuff around the edges and certainly the sort of contaminated soil in the Toronto area, as we articulated in the Environmental Services segment. But by and large, I think we’ve yet to see any material impact.
Stephanie Yee: Okay. That was great color. Thank you.
Operator: Thank you for your question. Our final question comes from the line of Chris Murray with ATB Capital Markets. Chris, your line is now open.
Chris Murray: Yes. Thanks guys. So just one final kind of cleanup, just thinking about capital and self-help initiatives. Can you guys maybe lay out how should we think about 2024? And how much is going to be capital driven? You talked a little bit about the fact that you would probably have pulled ahead some capital into 2023, maybe even into 2024. But Luke, just listening to you, it feels like a lot of what’s left to be done now would be more around pricing and just process. So if you can just lay it out how you think capital plays into what you can do for margins, that would be great.
Luke Pelosi: Yes. Chris. So I’d bifurcate it into two separate buckets. We have a whole host of organic operational type initiatives that are what I would call capital light that we are actively pursuing, and you can think about sort of pricing-related items. Some of those will have a modest capital sort of requirement if you think about some of the ancillary charges for blocked bins or overflowing gipping hands. There is some truck augmentation that you do. But by and large, a lot of those self-help levers are, what I would call is capital light, and then, you have the separate bucket of incremental largely sustainability-related growth items. And those will have an incremental capital component to them. I think what we said already is a roughly $40 million to $50 million coming out of EPR and spend sort of roughly $200 million for that.
That would be incremental growth. And to the extent that, that opportunity can grow above that, it’d be a corresponding incremental capital investment. But the self-help within the existing portfolio, I would describe as relatively capital light. It’s really how much above and beyond incremental growth opportunity are we going to be successful in securing. And that’s what – as Patrick said, we need another sort of quarter or so before we put a finer point on that.
Chris Murray: All right. Fair enough. And maybe just to come back to it. I mean, you did put out the number in the deck thinking about your leverage, how it came down in the quarter and about half of it was deployed into new growth. Is that maybe a different way to frame it is to think about of that 60 basis points to 70 basis points of natural delevering. Maybe think about half of it goes back into growth initiatives, half of it goes to debt reduction, as we go into the next couple of years?
Luke Pelosi: I think that ratio was historically true. But now, as this inflection point has been reached with the free cash flow generation and the EBITDA growth dollars of the business, the relative impact of M&A and other capital deployment is much more muted compared to that deleveraging capability. And this goes back to – you hear from Patrick and myself the conviction in the deleveraging because the base business deleveraging profile is so robust that even larger amounts of M&A do relatively immaterial sort of change to that. So I think if you’re modeling a 65 basis point, 75 basis point organic deleveraging in a normal course model, M&A and other things move that to the tune of 10 basis points to 20 basis points, not to the tune of half of that.
Chris Murray: Okay, that’s helpful. Thanks, guys.
Luke Pelosi: Thanks.
Operator: Thank you for your question. This concludes our question-and-answer session for today’s call. I will now pass back for any final remarks. Thank you.
Patrick Dovigi: Thank you, everyone, and appreciate the support, as always, and we look forward to speaking to you after Q4. Thank you very much.
Operator: This concludes today’s GFL Environmental 2023, Q3 earnings call. Thank you for your participation. You may now disconnect your lines.
