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GENERAL SECTION
Environmental Business Planning
ACQUISITIONS AND DIVESTITURES
Many companies seek to grow their business both in revenue and market share through acquisitions. Others are planning divestitures as part of restructuring or to generate capital. In either case, effective business planning for environmental issues is critical, but the approach to buying and selling is different.
WHAT CAN THE BUYER DO FOR ENVIRONMENTAL BUSINESS PLANNING?
Industrial and/or commercial facilities that have existed at the same location for many years have the potential to negatively impact soil and ground water. Depending upon site-specific operations, the cost to cleanup past operating practices can kill or significantly change the dynamics of the deal. Similarly, noncompliance with environmental, health and safety regulations could result in ongoing significant expenses and penalties, operational restrictions, or even civil and criminal proceedings against the company if discovered by a regulatory or a third party. Another concern is the company that is being acquired may have had historical operating practices that may have created chronic medical conditions for employees.
How the acquisition is structured defines the degree of responsibility that the buyer assumes. By working with the buyer’s environmental legal counsel, the Payne Firm can quickly identify and quantify the environmental, health and safety exposures that are material to the deal. The Payne Firm would visit the facilities, assess the history of the site, assess historical and current compliance status with regulations and perform sampling, as warranted, to quantify issues of concern identified during the initial assessment. The results are presented as tables with probabilistic cost estimates to allow effective business decisions. The due diligence process must be fast and efficient, but sufficiently focused and thorough to identify all cost exposures for the buyer.
WHAT CAN THE SELLER DO FOR ENVIRONMENTAL BUSINESS PLANNING?
The potential seller can also position itself for a strong negotiating position if its environmental business planning is performed before the deal is initiated. The issues identified as potential problems can be managed to enhance the value of the seller’s business by quantifying its exposure for the environmental, health and safety issues. By understanding the exposures, the seller is never surprised at the negotiating table by a buyer who knows more about the site than the owner.
As with a potential buyer, the Payne Firm would visit the facilities, assess the history of the site, assess the historical and current compliance status, and perform sampling, as warranted, to quantify issues of concern identified during the initial assessment. Because sensitive information may be gathered, we suggest that any assessment be conducted under the guidance of legal counsel. Documentation is typically kept to a minimum. Any sampling results and cleanup estimates are appropriately based on applicable standards and enforceable points of compliance.
Once the quantification is made, the seller has several options. The range of approaches to mitigate potential exposures may include documentation of no need for action, voluntary action under state or federal regulatory framework, escrow accounts, insurance policy, and various combinations of the above options. The seller is in control at this time and can correct potential costly issues at the lowest cost and at the seller’s schedule. By taking action before the deal is started, the seller can maximize the value of the asset and minimize long-term liabilities.
SUMMARY
The Payne Firm can assist you in developing a strategic environmental business plan should you wish to grow your business or sell your business. For more information, please contact Tony Domanico or Don Fay at (513) 489-2255 or by e-mail at aid@paynefirm.com or daf@paynefirm.com. You may visit us at our web site at www.paynefirm.com.
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