Federal Signal's Big Bet on Trash: Inside the New Way Acquisition

DOWNERS GROVE, IL – November 26, 2025 – Federal Signal Corporation, a stalwart of industrial and safety solutions, has officially closed its acquisition of New Way Trucks, a leading manufacturer of refuse collection vehicles. While acquisitions are common, this move represents more than just a line item on a balance sheet; it is a calculated pivot deeper into the resilient and surprisingly dynamic waste management sector. The immediate upward revision of Federal Signal's 2025 financial outlook underscores the company's confidence, but the real story lies in the long-term strategy to turn this strategic purchase into a significant profit engine.

The Strategic Blueprint: More Than Just Trucks

The acquisition instantly bolsters Federal Signal’s Environmental Solutions Group by absorbing a powerhouse in the refuse industry. New Way Trucks, the largest privately held manufacturer of its kind in North America, brings not only a strong brand but also a formidable market position, particularly in the high-demand segment of automated side loaders. This is not a speculative play on an emerging technology, but a firm foothold in an established, essential market.

As Federal Signal's President and CEO, Jennifer L. Sherman, noted, the deal is a "natural fit within our Environmental Solutions Group." The rationale is clear: New Way arrives with a current order backlog exceeding $100 million, providing immediate revenue visibility well into the first half of the coming year. This backlog de-risks the initial phase of the acquisition and provides a stable foundation from which Federal Signal can begin implementing its value-creation strategy. By acquiring a company with proven demand for its products, Federal Signal bypasses the speculative phase of market entry and moves directly to optimization and expansion. The welcoming of New Way's more than 750 employees also signifies an infusion of specialized talent and deep industry knowledge into the larger conglomerate.

Unlocking Value: The Integration Playbook

The true test of any acquisition is not the handshake, but the integration. Federal Signal has articulated a clear plan to commercialize the potential of New Way by leveraging its established "specialty vehicle platform." This playbook involves two key initiatives: "80/20 product optimization" and a significant "aftermarket expansion."

The 80/20 principle, a classic operational excellence strategy, suggests that Federal Signal will analyze New Way's entire product portfolio to identify the 20% of vehicles that generate 80% of the profit. This will likely lead to a streamlining of operations, focusing manufacturing and sales efforts on the most successful and profitable models, while potentially phasing out less impactful ones. The result is a leaner, more efficient production process with higher margins.

Simultaneously, the focus on aftermarket expansion is a critical step toward building long-term, recurring revenue streams. Refuse trucks are high-use, heavy-duty assets that require constant maintenance, service, and parts. By expanding New Way’s already robust service network through its own extensive platform, Federal Signal aims to capture a larger share of the total lifetime value of each vehicle sold. This transforms a one-time capital sale into a sustained, multi-year revenue relationship. The financial architecture of the deal reflects this long-term view. While the transaction is expected to be neutral to earnings per share (EPS) in 2026 due to integration costs and investments, the company projects it will be significantly accretive by 2028, adding between $0.40 and $0.45 to EPS. This projected lift is fueled by anticipated annual run-rate synergies of $15 million to $20 million, a clear target for the integration team.

Betting on a Resilient Market

Federal Signal's move is underpinned by the fundamental strength of the waste management industry. Unlike more cyclical sectors, refuse collection is an essential service with stable, predictable demand driven by population growth and urbanization. The numbers paint a compelling picture: the U.S. market for automated side-load garbage trucks alone was estimated at nearly $2.3 billion in 2024 and is forecast to grow at a compound annual rate of nearly 5% over the next decade.

This steady growth provides a defensive moat for Federal Signal, insulating a portion of its revenue from broader economic downturns. The acquisition of New Way is therefore not just an offensive play for market share, but also a strategic hedge. By investing heavily in the infrastructure that supports a basic societal need, the company is building a more durable and predictable business model. The industry is also far from static, with a growing appetite for innovation in areas like vehicle electrification, advanced segregation equipment, and real-time monitoring—areas where a well-capitalized parent company like Federal Signal can accelerate research and development.

Navigating a Competitive Landscape

The refuse vehicle market is a competitive arena, with established players like McNeilus and Heil constantly vying for dominance. Federal Signal’s acquisition of New Way, described as one of the fastest-growing companies in the sector, is a significant disruption to this landscape. It instantly elevates Federal Signal's standing and creates a more formidable competitor with a broader product portfolio and enhanced operational scale.

New Way has already built a reputation for innovation, developing specialized solutions like high-compaction organic waste trucks. Under Federal Signal's ownership, the capacity to invest in and scale such innovations will be magnified. The integration will allow the combined entity to better compete on price, technology, and service, potentially pressuring rivals to consolidate or double down on their own R&D efforts. As municipalities and private waste haulers increasingly look for more efficient, environmentally friendly, and technologically advanced solutions, the combination of New Way's agile product development and Federal Signal's manufacturing prowess and financial might creates a powerful market force. This strategic combination is poised to capture a greater share of the future of waste collection, turning today’s trash routes into tomorrow’s consistent profits.