Federal Signal Corporation is expanding into the refuse collection vehicle market through a $396 million acquisition of New Way Trucks in a strategy aimed at capturing automated side loader market share.
The deal between Chicago-based equipment manufacturer and Scranton, Iowa-based New Way could reach $450 million with tax benefits, or approximately 11x New Way’s projected 2026 earnings before interest, taxes, depreciation and amortization (EBITDA). The acquisition includes New Way’s five manufacturing facilities in Iowa and Mississippi as well as its workforce of 750 employees.
“This is not a decision we made lightly,” said Mike McLaughlin, New Way CEO, in a statement. “As a family-owned business, this company has been part of our lives for nearly three generations. It has grown thanks to the hard work and dedication of our employees, distributors and partners, and their belief in what we do. They are the heart of this company, and we are deeply grateful for everything they have contributed. Together, we have built this company to be the largest privately held manufacturer of refuse equipment in North America.”
Scranton Manufacturing was founded in 1971, originally manufacturing farm equipment. In 1984, the company acquired New Way Trucks, based in Des Moines, Iowa.
The expected synergies between Federal Signal’s specialty vehicle platform and New Way encompass operational models, expanded aftermarket service, dealer development, and unlocking growth. The company anticipates growth and margin expansion opportunities beyond three years as it focuses on its 80/20 principles, said Jennifer Sherman, Federal Signal president and CEO, during an investor call.
“As many of you know, we have been distributing third-party refuse trucks through our Joe Johnson Equipment network for almost a decade,” Sherman said. “Throughout that time frame, we’ve been able to intensely study the refuse collection vehicle industry and its players, and we believe we have identified the ideal anchor tenant in what is a new specialty vehicle vertical for us.”
Automated side loaders (ASLs) account for 37% of North American refuse collection vehicle sales, up from 29% five years ago, according to National Waste & Recycling Association data.
“By harnessing the power of our specialty vehicle platform, we are targeting annual run rate synergies of between $15 million and $20 million. These synergies, coupled with core organic growth at New Way, combined to form our $55 million EBITDA target for 2028,” she said.
Reaching new markets
Federal Signal is continuing on its path to optimize manufacturing efficiencies through workforce productivity, safety and automation.
“A great example of how effective this process can be is our Ox Bodies dump body business based in Fayette, Alabama, with the same operating team in 2023, was able to drive a 90% reduction in standard dump body SKUs through its 80/20 initiatives. This initiative helps expand Ox EBITDA margins by more than 800 basis points over a two-year time frame, while Ox meaningfully expanded its market share,” Sherman explained.
The optimization of New Way’s aftermarket footprint of 35 dealer locations will “materially increase New Way’s reach, driving more robust parts coverage, closer proximity to customers and ultimately allow New Way to penetrate historically underserved regions,” she said.
Sherman cited New Way’s current reach in Canada, where the acquisition will provide additional opportunity to expand its market share with Federal Signal’s 10 service center locations in the country.
“Within the aftermarket expansion opportunity, we are particularly excited about parts,” she continued.
“As New Way’s growing installed base of trucks reaches more optimal part consumption ages over the next three years, we see us well positioned to use our combined aftermarket footprint to drive a higher capture rate for this expanded opportunity set. Additionally, we plan to further accelerate our existing build more parts initiative, whereby we have chosen to vertically integrate certain parts production in order to drive increased recurring revenue streams and higher aftermarket share.”
Federal Signal has realized double-digit growth with the initiative, which is only a “few years old.”
“Owing to a combination of these strategic initiatives, we see [an] opportunity to increase New Way’s aftermarket sales mix into the mid- to high teens range, as a percentage of net sales by 2028,” she said.
Market intelligence and data
The stage is set for incremental opportunities via new product development, sales channel optimization and market intelligence, Sherman indicated.
The strategy includes enhancements to New Way’s front loader line, while cementing its market share with non-commercial driver’s license and ASL offerings, as well as technology advancements.
“Similar to other specialty vehicle acquisitions that we’ve completed in recent years, we also see sales channel alignment opportunities. In particular, we will aim to scale direct sales into private haulers, an important customer group that has been historically underserved by New Way,” Sherman said.
“We also see incremental cross-selling opportunities across our other specialty vehicle offerings including street sweepers, vacuum trucks, municipal maintenance tractors and certain specialty dump bodies and trailers.”
The acquisition is expected to close in the fourth quarter of 2025 upon regulatory approval and customary closing conditions.
