By Joachim Grittmann and Kristina Marx

A rise in costly post-acquisition environmental disputes has meant buyers are increasingly evaluating a target’s environmental compliance before completing a transaction. The sheer variety of regulations concerning environmental protection, coupled with the speed and frequency of regulatory change, means companies are forced to continuously adapt their activities to new circumstances and thresholds to avoid penalty.

In Germany, for example, a recent amendment to the German Law on Recycling and Waste (now the Recycling Act) and the implementation of the IED Directive has forced German companies to re-visit their environmental compliance. Under the amendment, producers are now obliged to reduce the overall effects of resource use and improve the efficiency of its use, in particular, through avoiding the generation of waste and through recycling. The IED Directive requires companies to adjust their operations to new emission thresholds and implement best available techniques to prevent and control industrial pollution.

As the goalposts of environmental compliance are consistently changing, acquirors need to assess the target’s liabilities across its entire supply chain to mitigate the potential for post-acquisition environmental disputes.