Environmental Due Diligence in M&A Transactions: All Appropriate Inquiry, Bona Fide Purchaser Defense

Description

Environmental due diligence in M&A transactions involves the assessment of known, potential, and contingent environmental liabilities and obligations associated with the properties and operations of the target company and its affiliates.

Consequently, proper environmental due diligence includes assessing the target company's compliance with environmental requirements and the potential for liability at sites used by the business or sites to which the business arranged for hazardous material disposal. And while the scope of due diligence assessment varies, savvy counsel must structure the due diligence to identify the liabilities and risks associated with the target.

One of the best known--yet poorly understood--aspects of environmental due diligence is "all appropriate inquiry" (AAI). AAI is a gating issue to the bona fide purchaser defense. CERCLA and similar state laws provide that an owner or operator of real property can be held liable for any onsite contamination. But they also offer certain statutory defenses if the purchaser can prove it conducted an AAI. Such an inquiry qualifies the party as a bona fide purchaser such that it may be able to avoid CERCLA liability for any preexisting contamination subsequently found on the acquired land. Similar protections available to "secured creditors" will also be discussed.

Listen as our authoritative panel provides practical guidance on environmental due diligence in M&A transactions, the common and lesser-known types of environmental risks that can arise, how those risks can be assessed and mitigated in a transactional context, and robust liability defenses that may be available and obtained through the due diligence process.