Is enough consideration given to Environmental health and safety due diligence?

This topic contains 5 replies, has 6 voices, and was last updated by  Jerome Baumgartner 3 weeks, 6 days ago.

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  • #119277

    Ceri Barton
    Participant

    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?

    #119333

    Michael Hubsmith
    Participant

    We run into the need for an environmental study to be completed prior to being able to sell real estate with the sale of a business in some industries. These studies are expensive, remediation more expensive and sometimes are a deal killer. In these situations, we will have the buyer and seller work out a lease arrangement versus buying the real estate.

    #119456

    VishnuVardhan A
    Participant

    there is no viable alternative to fossil resource(coal or oil) – only claims till date
    the reason why it hasn’t been replaced yet. its also the reason why many nations keep pushing their realizations further into the future.
    its better to do a DD taking that into consideration.
    it might be an uncomfortable fact to live with, going all activist mode on the target company might put the deal at risk.

    #119531


    Participant

    I think it depends on the industry and the type of assets that could be exposed to environmental hazards. In my limited experience with this specific type of DD, I recall various environmental studies being performed (but I don’t think it was technically “due diligence” but more of condition to get to the closing table). Also, I’ve certain this typically covered with extensive indemnification provisions buried in the terms & conditions of the purchase agreement.

    #119952

    Pawankumar Sharda
    Participant

    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.

    #121002

    Jerome Baumgartner
    Participant

    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.

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