Preparing to Sell Your Business: Tips For Reducing Environmental Risk
(Based in part on excerpts from Brownfield Science & Technology, Inc.)
Environmental issues can derail a transaction and seriously impact value unless business owners take a proactive approach. Buyers and their lenders will conduct environmental due diligence so it is imperative that sellers plan ahead and get their environmental house in order. Below are tips for sellers:
- Get ahead of environmental issues by conducting an internal audit.
- Make environmental part of your exit strategy.
- Keep your records organized, complete and accessible.
- Assemble your prior environmental documents, reports, assessments, permits etc.
- Designate one person to be in charge of managing the environmental information.
- Have an attorney knowledgeable in environmental issues on your team and include them from the outset.
- Do not expect that your prior Phase I Assessment will be accepted by buyers. Also keep in mind lenders will require a new Phase I by a firm they select. Different consultants and environmental attorneys may draw different conclusions.
- If there are legacy environmental issues consider whether you want to manage these post-closing or transfer to the buyer. If transferred be prepared to set aside funds in an escrow or take a reduction in price.
- Consider brownfield site buyers such as Environmental Liability Transfer Inc. These groups can help facilitate a transaction for well positioned real estate.
- For properties with well defined post-Phase II issues, environmental insurance is a possibility.
- Ensure sufficient environmental language is in the purchase agreement documents to include due diligence, access agreements, data security, cost sharing arrangements, specific end-points, regulatory thresholds etc.
Do not be deterred by environmental issues when considering your exit plans. Buyers of established businesses with historic industrial activity are not expecting pristine conditions. But preparation and having a qualified team can make a transaction much smoother for both buyer and seller and result on better value.
This article is based on information provided by Brownfield Science & Technology, Inc. (BSTI). BSTI has an excellent article detailing more of these issues: https://www.bstiweb.com/ten-insider-tips-reducing-environmental-risk-commercial-real-estate-transactions/ BSTI (www.bstiweb.com) is a provider of environmental assessment, remediation and consulting services to industrial and commercial clients, legal counsel and real estate stake-holders.