Paul Hastings LLP
Thomas R. Mounteer
August 4, 2014
Private equity (“PE”) investment opportunities abound in many commercial sectors, including those with a history of more intensive chemical use and, hence, greater risk of environmental liability. Over the past two decades, PE investors, and lenders to PE investors, have become much more sanguine about environmental liability risk. As they gear up to participate in an active market, the following “do’s” and “don’ts” will help PE investors avoid unnecessary environmental liability risk.
- When Acquiring Equity, Do Proper Diligence into Legacy Environmental Liabilities
When a PE firm buys a portfolio company from another PE firm, the acquisition is almost always structured as an equity purchase (e.g., the purchase of the target’s stock or LLC member interests). With that structure, and without indemnities, equity purchasers succeed to all the target’s legacy environmental liabilities.