by Kimberly Mann ,
Senior Vice President - Environmental Practice, Marsh
05/15/2023 · 3 minute read
Despite today’s difficult macroeconomic environment, merger and acquisition (M&A) activity remains an important component of companies’ plans for strategic growth. But transactions are under increased scrutiny, underscoring the need for both buyers and sellers — whether in the US or abroad — to understand and employ creative solutions to reduce their risks. These include identifying and addressing any environmental exposures that could impact the return on investment, and in some cases derail the transaction itself.
Many organizations — especially those in the chemical, oil and gas, and power generation industries as well as real estate investors and developers — have become more aware of potential environmental risks inherent in a property transaction. Existing property contamination or pollution conditions, for example, can result in significant environmental liabilities, which could require costly remediation and substantial monitoring expenses. Regulatory action for natural resource and biodiversity damage may lead to hefty fines and penalties. Organizations may also face third-party liability and mass tort claims, which often bring about significant legal defense expenses.
Organizations can reduce their risks and increase the likelihood of a successful transaction by taking three steps:
Whatever the size of the transaction and irrespective of the industry, buyers and sellers will likely face environmental risks. Careful due diligence, clear indemnification clauses, and a tailored environmental risk insurance program can help you address these challenges and successfully close a deal.