23 November 2009
Today's economic climate has forced companies to take a fresh look at their capabilities – with many deciding to rationalise and restructure their operations and to focus on their core business and resources.
As a result, some have chosen to divest themselves of non-core activities and assets, a move which in a number of sectors has proved more challenging than might at first be expected, not least where environmental issues are involved. These can range from securing the successful and timely transfer of environmental permits to allocation of risk and responsibility in relation to contaminated land, to retaining good relationships with local communities where, possibly for good reason, there is heightened environmental sensitivity.
At B P Collins, a cross-practice team of environment law specialists led by Tim Walton, partner in the corporate and commercial team, provides relevant environmental expertise and support to its clients, whether contemplating rationalisation or restructuring, or opportunities to buy, that the economic downturn presents.
The firm has a strong and long-established track record in the environmental, waste management and renewable energy sectors and its client base includes companies such as Greenstar UK, the Summerleaze Group, Grundon Waste Management and Sixt Kenning.
For those companies that are keen or compelled to restructure and/or sell their non-core businesses, the slowdown in the economy means potential buyers and finance providers are taking an increasingly close look at potential environmental liabilities.
"There is less money available from lenders and if they identify any risk or potential liability that may impact on a company's bottom line then they are unlikely to make funding available for a purchase or to support a restructuring," said Walton.
"Companies that intend or may be compelled to contemplate a rationalisation or restructuring of their business, or that are prospective buyers in the present market, should make an early and detailed assessment of environmental compliance and contamination issues.
"They should consider for example, whether there will be a need for changes to or transfers of permits, for insurance, for environmental warranties and/or indemnities or, on a purely operational level, whether adverse local sentiment may impact on the business – all of which can prevent or delay a deal. By doing this, they can plan with more confidence and take action early on to ensure that there are no unwelcome surprises."
B P Collins' experience and ability to bring a "lateral thinking" approach to anticipating and solving problems that can threaten prospective deal have helped clients to secure successful outcomes.
In the case of a clinical waste management client that was compelled to dispose of part of its operations before proceeding with a sale of its principal business, a seamless transfer of environmental permits between seller and buyer was imperative to ensure that the business continued without a break. Because of the amount of paperwork and bureaucracy involved, this proved harder to achieve than anticipated, but the innovative and persistent approach adopted by the B P Collins team ensured that it was.
"Originally we were told it couldn't be done to the required timetable. We were not prepared to accept that and worked with our client, environmental consultants and the prospective buyer to find a solution that ensured that the deal happened on time with the right permits in the right names on the right day, which meant everyone was happy," said Walton.
"We like to think of that as a typical example of our commercial and environmental experience combining with a proactive approach and some creative thinking to add value and to help clients get the outcome they want."
Potential problems such as these highlight the need for businesses to work closely and to be as transparent as possible with their legal and other advisers so as to identify any issues – environmental or otherwise – as early as possible in the process so that effective solutions can be found.
An example of B P Collins' experience in dealing with contamination issues in corporate and property transactions involved land that had been contaminated by a chemical leak from an adjacent site. Although appropriate clean-up measures had been implemented, the fact of historic contamination threatened a prospective sale several years later to a buyer that was concerned about inheriting a continuing and long-term liability.
"Another occasion when what looked like a straightforward commercial deal, turned out to be anything but. We had to find ways to satisfy the buyer that the deal was still a good one and to meet our client's expectations at the same time, which is what we succeeded in doing," added Walton.
A less obvious but more difficult challenge in the environmental context can be to determine the impact on a business of its local reputation whether based on a "not in my back yard" reaction or, more specifically, on the effect of the business and its activities on the local environment.
"There are times when a deal may look good on paper, but when you look at how the business is carried on, whether it is complying with its environmental permits and how it is regarded by the community in which it operates, a very different picture can emerge," Walton added.
"Our experience and ability to ask the right questions about environmental issues have enabled us to identify activities and operating practices that were not otherwise disclosed or immediately apparent and that were provoking high levels of local hostility and increased scrutiny by the Environment Agency. Not something that our clients wanted to hear but information that they valued as it enabled them to make informed assessments of commercial risk."
B P Collins has a long and established involvement in the renewable energy sector. Please contact the environment law team on 01753 279075, complete the online enquiry form or email environment@bpcollins.co.uk. |
