Security Shredding and Storage - a shredding industry publication

Export Regulations Stericycle’s $2.3 Billion Acquisition of Shred-it Raises Some Concerns

By P.J. Heller
The acquisition of document destruction business Shred-it International for $2.3 billion by waste management firm Stericycle may prove to be a win-win for both major companies but is raising concerns among some smaller players in the shredding industry.
For Stericycle, which provide disposal services for medical and biohazardous waste for hospitals, laboratories, physician practices, dental clinics, long-term care facilities and other businesses in more than a dozen countries, the acquisition is expected to give them entrée to document destruction services for those clients.

Shred-it, meantime, with some 400,000 customers in 15 countries, could expand its shredding services to Stericycle’s healthcare clients.

“By combining Shred-it with our business-to-business compliance solutions, we are providing the marketplace with a broader portfolio of services,” said Charlie Alutto, president and chief executive officer of Stericycle. “Stericycle has a lot of experience selecting and integrating acquisitions, and we believe that Shred-it represents one of the most attractive opportunities for our business that we have ever seen.”

“The acquisition by Stericycle will allow continued innovation and expanded service offerings to a broader range of customers across the globe.” added Dave Samuel, chairman of Shred-it.

The acquisition of Shred-it from Birch Hill Equity Partners, Cintas Corp., and other equity holders, was initially announced in mid-July and was completed in October.

The effects of the acquisition are being closely monitored by some in the document destruction industry.

“There are small independent service providers that are nervous about that linkage [between Stericycle and Shred-it],” noted Robert Johnson, chief executive officer at the National Association for Information Destruction. “They are very much paying attention to whether or not they will see this impact their current healthcare clients.”

One of those small independent service providers is Shred Pro Services, which was launched in 2008 and provides on-site document destruction services and records management to clients through the greater Houston, Texas, area.

“I worry about the impact the acquisition will have on smaller companies like Shred Pro Services,” admits Darleena Lanier, an owner and vice president of the Houston-based business. “The Stericycle-Shred-it merger is an acquisition that has me concerned.”

One possible issue is that Stericycle could offer a “package deal” for medical waste disposal and document destruction, undercutting independent document shredding service providers. Stericycle did not respond to a request for an interview.

“In exchange for the higher cost of medical destruction, they now have the ability to offer free or reduced-priced document destruction as part of their services,” Lanier said. “With current competitive pricing in our area, just to make one truck payment, a small shredding company may have to service up to 90 clients who currently have one container serviced on a monthly basis. Throw in multiple trucks, costs for fuel, payroll, utilities, truck maintenance, etc., it takes a massive amount of scheduled services to cover basic bills.”

Johnson said that the Shred-it acquisition made sense for Stericycle, which was already subcontracting out document destruction services for some of its medical waste clients. The Canadian-based Shred-it will now be a wholly-owned subsidiary or Stericycle, which is headquartered in Lake Forest, Ill.

“It would be no secret to anyone that Stericycle already has a large market share of the medical waste hauling industry, so they’ve got a large number of healthcare companies,” Johnson noted. “And certainly we would expect them to leverage that footprint that they have in medical waste hauling to expand their organization services into other healthcare organizations where they’re not already involved.”

Document destruction services would be a key offering.

“Anyone can understand that would be the logical assumption,” Johnson said. “That will be where they concentrate. That will be their initial goal. They do have a large foothold in the medical world already. They’re obviously going to concentrate on that and one of their major pushes would be to leverage those contacts and that business platform to be able to expand their shredding business.”

Johnson, however, said that approach still could face some challenges.

“It’s a sound strategy. But it isn’t as simple as it might sound,” he said. “Often while that sometimes seems it would be very logical and simple, it often is more difficult.”

The reason: “Very often it’s not the same decision maker within the organization and they have a different set of priorities. Those different decision makers have a different set of priorities,” he explained.

“As far as how effective that strategy will be, we all just have to wait and see,” he added.

Johnson noted that prior to the acquisition, shredding companies already faced stiff competition from Shred-it.

“Shred-it was already a formidable competitor in every marketplace,” he said. “It isn’t like Shred-it wasn’t a good competitor before. They were already very aggressive and a very good operator. That part won’t change and I don’t think anyone is overly stressed necessarily about any change in that area. If there has been any concern, it’s really been about what‘s going to be the effect on the healthcare client. With the very logical and very evident strategy that Stericycle will have, will it actually work and will they see any erosion there.”

Lanier said Shred Pro Services has won some and lost some in competing against Shred-it and other large shredding companies.

“We have gained new clients who felt they were ‘lost in the shuffle’ with Shred-it being a larger company,” she said. “But we have also lost clients with larger companies who wanted one vendor company to handle offices nationwide instead of using local smaller shredding companies. We have also lost large medical accounts because Shred-it can offer lower rates that a smaller company simply cannot compete with.”

Smaller companies such as Shred Pro Services have held on to their customers because they offer more quality of service and personal attention, she noted.

“We like to take pride in trying to the best of our abilities to accommodate normal and ‘unusual’ circumstances for secure document destruction and records management for our clients,” Lanier said. “We take that extra step to help our clients customize their services to be exactly what they need whether it is a residential client or a large corporate company.”

Even so, she expressed concern about competition from the Stericycle-Shred-it acquisition.

“I am worried that corporate companies’ main offices will be focused on the bottom line and will move to Stericycle if indeed package deals are provided,” she said. “We hope that those customers who may experience a decrease in the quality of their service during the transition of the acquisition are able to switch to a smaller document shredding service who will appreciate their business and offer a better quality and personal service in the long run.”

Member Login