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Don’t Mess Up!

In previous Deal Notes® we have discussed environmental matters including Environmental Liability (February 28, 2023) and conducting Environmental Audits (June 7, 2023). We again address environmental matters today from the point of view of avoiding concerns in the first place, i.e., creating an A&D company that avoids environmental concerns.

In today’s M&A market, whether your business is in manufacturing, distribution, or services, there is a full expectation on the part of the potential buyer community that the companies they are looking to purchase have fully implemented Lean Processes and 6S Programs that help to assure that all items and materials are being safely handled to prevent potential contamination leading to environmental concerns.

Thus, whether liquid, solid, or gaseous, all your materials should be properly utilized, scrubbed, stored, and scrapped. If your company requires materials that are potential environmental contaminants such as metal cleaning fluids, then they must be properly disposed of at Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) approved sites. Lean and 6S implementation assures that all your personnel are properly trained, weekly internal audits are conducted, and regular third-party assessments are held. The buyer community will of course do their reviews to assure that a property is not contaminated through All Appropriate Inquiries (AAI) Rule implementation, but they will be enormously comforted when they tour an A&D company and see that Lean and 6S have been implemented.

Thus, when we say, “don’t mess up,” we mean to say that you, as a seller of a middle market A&D Company, have followed the regulatory rules and are operating the company in a manner to avoid ongoing potential contamination. That allows us to portray your company in such a fashion as to assure potential buyers that there a limited environmental risks.

Have a Great Day,

R. Bruce Andrews
Managing Director, Defense