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From Fortune 100 companies engaged in international acquisitions and divestitures valued in excess of $1 billion, to regional transactions involving privately held entities, MGKF attorneys and in-house technical consultants frequently facilitate environmental due diligence and resolve difficult environmental issues arising in corporate and commercial transactions. The breadth of our skill and experience in this area provides clients with the necessary confidence regarding potential environmental liabilities to move forward in the most complex of transactions involving the sale or acquisition of properties and businesses.

A substantial portion of our services in corporate and commercial transactions involves implementing pre-acquisition environmental due diligence. This area of practice is described in more detail below. In addition to navigating the environmental due diligence process, MGKF counsels clients in the full range of environmental issues arising in these transactions, such as:

  • drafting and negotiating environmental and risk allocation provisions in transaction documents;
  • assessing a business's historic regulatory compliance and facilitating the legal transfer of required environmental operating permits;
  • ensuring corporate compliance with state and local environmental laws throughout the country and abroad; and
  • initiating required disclosures to relevant regulatory agencies, including in the case of publicly held companies, the U.S. Securities and Exchange Commission ("SEC").

We are frequently called upon to partner with large national and international law firms that handle the corporate, real estate, and tax issues of the transaction while we address the environmental issues. Clients often pair our firm with other law firms (in some instances, firms with environmental practices), reflecting the client's determination that MGKF has the experience, legal skill and demonstrated efficiency to address challenging environmental issues in a manner that minimizes future client liability while allowing the transaction to close on time.

Importance of Environmental Due Diligence
The identification and evaluation of environmental liabilities in connection with corporate and commercial transactions, or "environmental due diligence," can be critical to the parties' assessment of the viability of the proposed business deal and the ultimate allocation of liabilities between the parties through the purchase agreement. Depending upon current and historic operations of the business, liabilities associated with environmental compliance and site conditions may exceed potential liabilities associated with any other aspect of the commercial transaction. The results of environmental due diligence may also have important implications for deal timing and financing, the availability of government liability protections, the future developability of the property, and facility operations and compliance issues.

The extent of MGKF's expertise in this area is considerable, ranging from transactions involving the purchase or sale of relatively small facilities, such as gasoline service stations, to sophisticated deals involving massive and complex multi-site industrial operations, such as petroleum refineries and chemical plants. Recognizing that "materiality" may differ from one transaction to another, our strategy is to design and implement due diligence programs that appropriately reflect the value of the commercial transaction. In this way, we neither allow a proposed transaction to become unnecessarily bogged down with relatively insignificant environmental issues, nor understate a potential liability that may be material in the context of a relatively small transaction.

In many transactions, MGKF has taken on primary responsibility for assembling the due diligence team (including, as appropriate, our own attorneys and technical consultants, outside professionals and client personnel), designing and scheduling specific investigative actions, assessing potential risks, identifying areas warranting in-depth evaluation, and providing recommendations to the business team concerning the financial implications of the environmental issues. In other circumstances, we have served as a member of a client-organized and managed due diligence team.

Our ability to combine legal and in-house technical expertise ensures that we are well-suited to assist clients in investigating and evaluating potential environmental concerns associated with corporate and commercial transactions, developing strategies to address these concerns, and drafting and negotiating appropriate contractual terms in purchase and sale agreements and financing documents—all with an eye towards minimizing future client liability consistent with deal objectives.

Environmental Due Diligence Process
Purchaser's Perspective: Whether the transaction involves the purchase or sale of a property or a business, the prospective purchaser needs to understand from the outset whether contamination is present, how that contamination might affect the proposed use of the property, and how it will be addressed going forward. It is also critical that historic environmental compliance issues and environmental constraints affecting future use of the property or operation of the business be identified, together with how future permitting obligations and anticipated regulatory changes may affect operations or site development. We assist our clients in identifying and developing strategies to deal with these issues in their transaction approach and business planning.

Seller's Perspective: Due diligence considerations are not limited to the potential purchaser. In order to facilitate and limit delays associated with environmental due diligence, sellers must be sophisticated and prepared to make available relevant information. Current standards governing disclosure of known liabilities also dictate that sellers must carefully avoid allegations of misrepresentation or failure to disclose material issues. We have extensive experience in assembling document or data rooms on behalf of sellers and maintaining and preserving such information through the due diligence process. Finally, a thorough advance understanding of the issues that may arise will enable the seller to develop strategies to meet the purchaser's concerns and minimize its own exposure.

MGKF's experience in representing both buyers and sellers extends to myriad tasks and skills, including the following:

  • Where it is possible to initiate environmental due diligence prior to negotiation or execution of a purchase agreement, we assist purchasers in reviewing existing environmental reports, permits, and other information and documents obtained either from the seller or government files and via on-line governmental databases.
  • It may also benefit sellers to perform environmental due diligence in advance of putting a business or property on the market in order to assess the condition of their assets, address readily correctable compliance or remediation problems in advance, and anticipate the positions that a sophisticated purchaser (or the purchaser's lender) may take regarding the valuation of environmental liabilities.
  • Due diligence that takes place when a property or business is under agreement may range from a simple Phase 1 Environmental Site Assessment to extensive environmental studies of soil, groundwater, and remedial actions, and may also involve review (or production) of hard-copy or electronic documents, meetings with government agencies, interviews with facility personnel, and more. We participate in these activities, assist in retaining and managing outside consultants, and work with client representatives to develop and implement a thorough yet efficient investigation into the relevant environmental issues in a transaction.
  • Negotiations over purchase and sale documents will require the parties to address many important issues relevant to the due diligence process and its outcome. We routinely negotiate and draft provisions and, where appropriate, separate environmental agreements, addressing the full array of issues affecting environmental due diligence and the allocation of environmental liabilities, compliance, and cleanup responsibilities. A more detailed description of this portion of our practice may be found here.
  • Finally, we are particularly cognizant of timing considerations attendant to corporate and commercial transactions, including the buyer's desire to proceed promptly with environmental due diligence and the parties' interest to promptly identify any business issues arising from the due diligence and reach a determination as to whether and under what circumstances the transaction will proceed. In order to minimize the impact upon the transaction schedule, we commit the necessary resources to ensure that due diligence proceeds both efficiently and effectively.


 

Photo ©2013 Avi Loren Fox Photography

The following are a representative sampling of our environmental due diligence engagements in corporate and commercial transactions:

  • MGKF represented an international telecommunications company in its divestiture of its domestic and international lighting businesses to two other international corporations. These were significant international transactions that involved coordinating with counsel in the United States, Europe, South America, and the Pacific Rim. MGKF was called upon to negotiate the environmental provisions of these transactions including representations, warranties, and indemnities.
  • The firm counseled a major international petrochemical producer in connection with the sale of a plastic resins and polystyrene manufacturing facility in Western Pennsylvania. The client's site was built by the United States government in 1942, and had substantial historic environmental impacts. MGKF oversaw the acquiring corporation's due diligence and negotiated the environmental provisions of the transaction. MGKF also negotiated a comprehensive environmental remediation agreement with the Pennsylvania Department of Environmental Protection that was critical to the transaction.
  • We assisted a large independent oil refiner in an asset purchase involving a 950-acre refinery in New Jersey producing in excess of 330,000 barrels per day of gasoline, oils, and other products. MGKF handled all environmental due diligence issues which primarily involved assessing the seller's historic environmental compliance. MGKF also addressed ongoing site remediation issues, the transfer of operating licenses and permits, negotiated consent order responsibility, facilitated compliance with New Jersey's Industrial Site Recovery Act, and drafted and negotiated all environmental terms of the Purchase Agreement and numerous related documents.
  • The firm counseled a privately held client in acquiring the stock of a major manufacturer of chlorine, caustic soda, and related products with plants throughout the United States. MGKF oversaw and participated in a comprehensive regulatory compliance evaluation for each facility, evaluated various site remediation activities occurring at certain of the facilities, and conducted an off-site liability assessment relating to each of the facilities under various state and federal laws. MGKF drafted and negotiated all environmental provisions in the stock purchase agreement and related documents and provided environmental support with respect to SEC filings.
  • MGKF represented a multinational technology and services company in the divestiture of its consumer electronics and medical supply businesses. MGKF oversaw all environmental due diligence related to the divestiture, negotiated environmental provisions in various agreements facilitating the divestiture, and ensured that property indemnity of the client was in place to minimize ongoing liability.
  • We advised a privately held client with industrial operations at nine different locations in Pennsylvania and New Jersey in the partial sale of company stock to a major European industrial processor. This multi-million dollar transaction was consummated in an extremely short time frame and required timely approvals and consents from the New Jersey Department of Environmental Protection and the U.S Environmental Protection Agency. MGKF secured all required government approvals and consents, drafted and negotiated environmental provisions in both the stock purchase and operating agreements including indemnity provisions, and managed all phases of environmental due diligence and compliance evaluations including the hiring of the environmental consultant and review of its reports.
  • The firm represented a private real estate equity firm in its $1.65 billion acquisition of a major nationwide retail chain consisting of 250 stores and distribution facility locations throughout the country. MGKF managed all pre-acquisition environmental due diligence activities for more than 23 million square feet of real estate in thirteen different states. Many of the retail locations were impacted by either the presence of historic underground storage tanks or by proximity to dry cleaning operations. MGKF attorneys and in-house technical staff facilitated the buyer's environmental due diligence and worked to resolve potential environmental liabilities at the various locations.
  • MGKF is involved in an ongoing representation of a national retail chain in hundreds of sale-leaseback transactions throughout the country, many of which involve former gas stations. MGKF manages all environmental due diligence in these transactions, drafts and negotiates environmental and indemnification terms in the sale-leaseback agreements, and ensures compliance with all applicable state property transfer and notification statutes.

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