EHS Support was contracted to direct and manage the due diligence associated with the acquisition of a leader in developing, manufacturing, and marketing wood preservation chemicals and wood treatment technologies. The target company was a diversified provider of wood preservation and wood treatment technology, as well as utility and railroad infrastructure services. The business has operations and sales in North America, Latin America, Europe, and Australasia. The business’s products serve a diverse range of end-markets including infrastructure, residential and commercial construction, and agriculture.
The acquired business operated 11 wood preservative manufacturing plants, 1 wood treatment plant, and a number of office, warehouse, and research & development (R&D) facilities throughout the world.
The effort required an accelerated schedule which included coordinated site visits at facilities in the United States, United Kingdom, Australia, and New Zealand. Quantifying historic liability associated with past site operations was critical to the deal negotiation and eventual closing. A probabilistic risk model was developed to address the site-specific issues at each of the primary treating facilities in the portfolio. Results of the financial model were then converted to a cash flow evaluation and discounted for present value to better define the impact of the remedial liabilities on the annual cash flow of the company and to determine the overall impact on their return on investment.
Project Background
Our client identified a strategic acquisition target, a privately held, provider of wood preservation and wood treatment technology, as well as utility and railroad infrastructure services. The business has operations and sales in North America, Latin America, Europe, and Australasia.
Work Scope
EHS Support conducted the following tasks:
- Conducted site visits to 11 then-active facilities, desktop reviews of an additional 3 active facilities and 6 former facilities, and completion of other desktop review activities. The objective of the review was to document known and potential environmental, health, and safety (EH&S) issues associated with the Company’s operations and facilities, and to document the Company’s ongoing activities to address these potential issues and to mitigate the potential for causing new issues.
- Reviewed and summarized technical and environmental information made available by the seller in an online data room.
- Interviewed knowledgeable persons regarding the company history and environmental matters.
- Evaluated risks of operating facilities and neighboring properties upon the subject property.
- Conducted on-site visits to view present conditions (chemical spill residue, die-back of vegetation, etc.); hazardous substances or petroleum products usage (presence of aboveground or underground storage tanks, storage of acids, etc.); and evaluate any likely environmentally hazardous site history.
- Reviewed federal, state, local, and tribal records out to distances specified by the ASTM E1527 and All Appropriate Inquiries (AAI) Standards.
- Developed conceptual site models (CSMs) for those locations with identified soil and groundwater impacts and quantified data gaps in the existing remedial strategies.
- Presented the findings of the diligence, including the financial modeling, to the company’s senior management.
- Worked closely with senior management team to develop risk management strategies to address the identified environmental liabilities.
- Post close, EHS Support worked with internal counsel and management to perform a detailed review of the remediation portfolio, developed CSMs for selected sites, and developed the environmental reserves for the acquired company.
Project Result
The approximately $460 million acquisition was successfully completed; the environmental liabilities were identified, quantified, and addressed as part of the closing financial reserves.
In addition, EHS Support conducted post-close environmental compliance audits of the chemical manufacturing facilities in four states to assess compliance and develop corrective actions plans for integration and improvement of the newly acquired company’s environmental management program. The facilities operations were evaluated for compliance with state and local laws and regulations pertaining to storage tank program compliance, solid and hazardous waste, water supply, wastewater, stormwater, air emissions, hazardous materials handling and management, and reporting.