By: Jerry Hincka
Environmental Considerations for International Acquisitions by Jerry Hincka
When working an acquisition involving international assets, there are a number of things to consider before you get to this question (translation provided below). When your international acquisition involves environmental permits, agreements, or liabilities, your evaluation scope may need to expand.
Most M&A firms have strategies laid out for environmental challenges involved in domestic acquisitions. Operating permits will need to be transferred, covenants regarding property use will need to be respected, and access agreements may need to be renegotiated. When these deals extend internationally, there may be more areas to pay attention to. A few examples:
- Access to information. We are accustomed to finding environmental due diligence information in a data room, or searching online for publicly available records. We dig deeper, via extended research, on areas that hit our evaluator’s ‘hot button.’ In accessing details, however, some countries, or some regions of countries, require proof of residency to access detailed information held by governing environmental entities in that region.
- Apples to Apples comparisons. Operating a piece of equipment safely will generally follow a number of basic standards and procedures, and comparing them from Brazil to Brussels to Boston is, at the surface, relatively straightforward. That being said, if your acquisition will include combining operations and transferring equipment, a completely different set of standards, and risk assessment protocol may be required.
- End of life requirements. Any transaction involving contaminated properties will likely include a thorough evaluation of environmental reserves, to assure that necessary costs are planned for. However, if the short-term plan is to merge and sell, there are countries and regions which require a higher standard of care (usually meaning costlier) if one is going to sell the operation, as opposed to managing the incident while continuing to operate as owner in that facility.
Then there are the ‘softer’ elements of an international deal, such as language barriers (Google translate does not capture inference or intent), time zone differences, and the customs and mores in how business people relate to one another. Even a person who ‘says what they mean, and means what they say’ can be open to interpretation!
Of course, the news isn’t all bad. Careful evaluation of existing operations in your acquisition may reveal benefits available in energy management, workspace design, cleaner production, or other areas. A number of countries, especially in Europe, allow for grants or tax credits which sometimes go ignored.
The bottom line? Before you ask ‘Do we have an agreement?’ (translated from German and Indonesian above), you may have to expand planning, teaming, and thought processes around international mergers and acquisitions.
To learn more about environmental-related considerations for international acquisitions, please contact Jerry Hincka.