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Purchaser’s Guide for Conducting Environmental Due Diligence

February 2012

Environmental due diligence plays an important role in corporate transactions.  If appropriate environmental due diligence is not done, the parties to a transaction may be faced with unexpected liabilities.  Here are a few due diligence tips to help a purchaser avoid liability and effectively negotiate environmental matters. 

Negotiate a confidentiality agreement   A confidentiality agreement is an effective way for a purchaser to establish the scope, process, and limitations of the due diligence review before documents are exchanged and site visits are scheduled.

Conduct environmental due diligence early   There are several reasons why conducting environmental due diligence during the early stages of a transaction is beneficial.

Request a list of environmental documents and information from the seller

Engage an environmental consultant to conduct a Phase I ESA and environmental compliance review 

Negotiate a site access agreement  Once the purchaser has completed its initial document review and engages a consultant to conduct a Phase I ESA, environmental compliance review and/or potentially a Phase II ESA, a site visit will likely be necessary. 

Consider how the environmental information can influence the transaction

Consider how regulatory and compliance information should be factored into the transaction

No two transactions are alike and the purchaser should develop an approach to environmental due diligence that fits with the facts and circumstances of the particular transaction.  These tips will help the purchaser develop an effective strategy for conducting sufficient environmental due diligence that will appropriately allocate environmental liability and add value to negotiations with the seller.

Kelly M. Martorano

Anna M. Maiuri