IS IT A DEAL POLLUTED WITH TROUBLE? MANAGING ENVIRONMENTAL RISKS A PRIORITY IN M&A
IS IT A DEAL POLLUTED WITH TROUBLE?
MANAGING ENVIRONMENTAL RISKS A PRIORITY IN M&A
NEW YORK, Dec. 17 /PRNewswire/ -- As worldwide environmentalism spreads and pollution regulations tighten, U.S. companies considering a cross-border merger or acquisition need to be aware of potential environmental liabilities before committing to a deal, according to KPMG Peat Marwick's DealWatch, a report on international business transactions.
"International business awareness alone does not guarantee success in cross-border deals anymore," says Peat Marwick's Lenz Neuhauser, national M&A director in Chicago. "Proper fact finding before the deal now goes beyond due-diligence, and into an area that a few years ago would have been dismissed as eccentric -- an awareness and concern for the environment," explains Neuhauser.
Different legal systems, cultures, and varying degrees of concern over real and potential environmental problems make managing the environmental risk in cross-border M&A deals difficult, explains Neuhauser. For example, depending on environmental regulations in a particular country, purchasers can be liable for problems stemming from long before they made a bid for the company.
"Legislative trends worldwide point to ever-stricter environmental regulations and enforcement, making it necessary for companies expanding internationally to comply with global standards," says Dr. Jan Vernon of KPMG's environmental consulting unit in London.
In Europe and Eastern Europe, public opinion is moving toward harmonization of environmental standards, explains Vernon. "Tougher penalties will also be imposed in pollution cases even in countries with a reputation for regulatory laxness," she adds.
As environmental issues begin to influence investment decisions, Neuhauser offers the following strategies to identify risk in cross- border mergers and acquisitions:
-- Determine if the target company has the proper consents, control orders, or certificates of operations with emissions into the atmosphere and water and solid waste disposal. If it does, make sure it is in compliance with regulations.
-- Obtain a clear history of a particular site's previous use.
-- Make sure the target company has accurate records on the type, amount and eventual disposition of substances with potential environmental risk.
-- Determine what the target company is doing with the solid or liquid waste it generates. Do they have credible defense should their practices be challenged or are they just hoping that it will never be noticed?
-- If the target company uses substances that can cause a medical risk, make sure a "timely and responsible" notification about potential hazard to workers and the community is posted. Also, that appropriate precautionary measures have been taken.
-- If the target company shares rented or leased space, determine if there could be an "over the fence" hazard from neighboring companies.
To learn more about worldwide cross-border acquisitions and joint ventures, call KPMG Peat Marwick's merger and acquisition information line at 1-800-932-KPMG.
KPMG Peat Marwick provides accounting, auditing, tax, and management consulting services to leading business, governmental, private institutions, and individuals through 135 offices in the United States. It is the U.S. practice of KPMG, which has operations in more than 120 countries and posted 1991 revenues of $6 billion.
/CONTACT: Lisa Meyer of KPMG Peat Marwick, 201-307-7763/ CO: KPMG Peat Marwick ST: New York IN: SU: ECO FC-JT -- NY006 -- 2950 12/17/91 12:22 EST