Environmental health and safety due diligence helps to ensure all parties have a full understanding of the liabilities and risks associated with the deal. What are the views on whether EHS is more often than not overlooked in a variety of areas including for example H&S compliance or third-party related risks?
The extent of Environmental, Health & Safety due diligence is all dependant on the industry of the target company. Some industry has more exposure to hazards than others. Accordingly, stricter regulations and guidelines have to be met by the target companies. For instance, O&G, Chemicals, mining, coal, etc have more stringent guidelines and reporting requirements as compared to the IT & software industry. More & more governments are bringing laws and reporting requirements related to EHS and companies may face serious consequences in case of any hazardous incident. Environment DD is something that should not be taken for granted. Acquirer company may face potential liability, lawsuits, and compensation claims if the target company does not have good HSE / ESG conduct in place.
I believe environmental assessment are sometimes challenging as the potential claims or reparations or almost limitless. It is therefore extremely challenging to get a clear quantitative assessment to include in the overall deal review.
I think EHS due diligence will differ based on the type of the target, regulations in place and the jurisdiction. One way in opinion to optimize the due diligence efforts is assess the potential impact of EHS risk. The outcome should be used decide how detailed the EHS due diligence should be.
This is an extremely important area especially if the deal if a cross country deal. Companies will need local advisors to conduct safety and environmental du diligence to ensure indemnities are included in the deal.