Reducing Toxic Waste Liability Risks in Asset Acquisitions

On the heels of a record year for mergers and acquisitions, environmental attorneys tell Bloomberg BNA companies acquiring the assets of another should take steps to reduce the chances they will face big dollar Superfund liability as a successor for hazardous waste contamination.

In 2015, buyers spent $3.8 trillion on mergers and acquisitions—the highest amount ever, according to data compiled by Bloomberg.

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“Most transactions are straight-forward, but there are a small minority of cases where it becomes an issue,” attorney Hamilton Hackney with Greenberg Traurig LLP in Boston told Bloomberg BNA recently.

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Unlike mergers and stock-for-asset deals, acquisitions follow standard successor liability, attorney David Mandelbaum with Greenberg Traurig in Philadelphia told Bloomberg BNA in an e-mail March 2.

“In an acquisition, CERCLA seems not to vary too far from ordinary rules: (a) in a merger, liability passes; (b) in a cash-for-assets deal, liability does not pass; and (c) in a stock-for-assets deal, there is risk of liability passing. That’s pretty much the same as the rule for any liability,” he said.

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When environmental contamination might be an issue, any company considering acquiring the assets of another must conduct due diligence, Grant Nichols, of counsel with Greenberg Traurig in Philadelphia told Bloomberg BNA March 2.

Nichols' practice is focused on managing environmental liabilities associated with large real estate and corporate transactions.

“The first thing we do is to hire an environmental consultant and conduct a Phase I assessment [to investigate contamination]. We then go through the databases to determine whether there are any increased actionable levels. Then we get an environmental insurance policy in place in the event of a pollution release, or recommend further investigation.”

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