Greening Due Diligence: Environmental Factors to Consider in M&A Preparation

‘Green-washing’ is pretty much endemic in the business world, with every company worth its salt aiming to showcase its environmental credentials, whether rightfully or as a PR exercise.

But environmental factors can be absolutely crucial in mergers and acquisitions, and can make or break some deals.

Buyers are right to carefully consider any potential environmental issues that the target company might face, and in some sectors this can be key.

Here’s our whistle-stop guide to what needs to be considered ahead of a due diligence environmental review:

• Any existing environmental litigation, investigations or other current claims relating to environment, toxic substances and so on

• Environmental permits and licences used by the company

• Any contractual obligations that the target company may have relating to environmental issues

• Thorough and up-to-date environmental audits for any property owned or leased (which may well also include the auditing of neighbouring properties not owned by the target company)

• Checks around any hazardous substances used by the company in any of its operations, including asbestos

• Checks around any petroleum products used on company property, other than by passenger vehicles

• Comprehensive correspondence files relating to any local or national environmental regulatory agencies

It’s essential that the target company carry out its own internal audit ahead of going to market, and that all records regarding environmental issues are checked as current and made easily available.

This will go a long way to impressing upon any potential buyers that environmental issues are taken seriously and are under control in the business.

It’s corporate citizenship as well as environmental stewardship in action, and it will show buyers that you’re on top of this increasingly scrutinized area.

For more information on environmentally-related or other preparations for the M&A process, contact our expert team.