Striking a Balance in
Environmental Due Diligence
By Dennis Papa
Congratulations—your M&A transaction went off without a hitch, and you’re now the proud
owner of a specialty chemicals manufacturer. Included with your purchase are any inherited
environmental liabilities of your new portfolio company—contaminated soil or groundwater
on the property, underground storage tanks, or chemical releases, for example.
To protect yourself as a buyer, a thorough investigation before the sale is essential. The
Phase I environmental site assessment has become a useful due diligence tool to consider
potential environmental liability during the M&A process. A key factor when conducting this
assessment for acquisitions of complex properties, such as chemical plants and other heavy
industry assets, is to be sure that the Phase I does what you need it to do.
Performed by a certified environmental professional, a proper Phase I should help the
buyer avoid liability for identified recognized environmental conditions and to qualify for the
so-called “innocent landowner” defense provisions under the federal Superfund law—
formally named the Comprehensive Environmental Response, Compensation, and Liability Act,