Environmental Due Diligence During Mergers and Acquisitions

business is realigning to gain resources, secure global markets, and invest in new technologies and product lines. The recent Chase-Chemical Bank, Disney-ABC, and Hoechst-Marion mergers are among the most visible of the approximately $400 billion worth of mergers and acquisitions announced in 1995. Thus, with a large number of companies and assets changing hands, attorneys are often providing advice regarding environmental liability associated with these deals. This article provides an overview of emerging environmental due diligence resources for mergers and acquisitions that can add substantial economic value to the deal by avoiding liability or reducing the purchase price. First, we offer a brief overview of the liability issues driving the due diligence process. Second, we highlight key components of the due diligence review in both hostile and friendly business transactions referencing consensus industry standards. Finally, we examine mechanisms by which management may best use information gained during due diligence to protect itself from environmental liability. The level of due diligence any company conducts is dependent on the purchaser's tolerance for environmental risk, available time, and the utility of insurance or financially backed indemnities and warranties.