PRACTICES

Mergers and Acquisitions/Due Diligence Services in the Chemical Sector

Overview:

In the first nine months of 2016, $149 billion (USD) was transacted in chemical sector deals. Mergers and acquisitions (M&A) activity was significantly up in 2015 and the surge is expected to continue in 2017 as a result of historically low energy prices, the ripple effects of mega-deals like Dow-Dupont, and activist investors seeking improved bottom lines. Because the chemical sector is heavily regulated, a sophisticated understanding of domestic and international chemical regulatory regimes, including the Toxic Substances Control Act (TSCA), Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), Act on the Registration and Evaluation, etc. of Chemical Substance (K-REACH), and related programs, is an essential component of due diligence. The lawyers and scientists at Bergeson & Campbell, P.C. (B&C®) are uniquely well-suited to assess highly-nuanced chemical product issues and assist with due diligence in acquisitions, divestitures, and other corporate transactions in the chemical sector.

Although one of the most mature of U.S. environmental statutes, compliance with TSCA is often overlooked as a core due diligence area in M&A work. TSCA is not among the "traditional" suite of environmental laws that include more "byproduct-based" laws, including the Clean Air Act (CAA), Clean Water Act (CWA), and Resource Conservation and Recovery Act (RCRA). TSCA and other "product-based" laws are more nuanced and require skilled experts that can identify latent problems and potential indiscretions, including deficits in chemical identity and toxicological testing anomalies. While subtle, these deficiencies can invite substantial regulatory and/or toxic tort liability. Particularized expertise is required to identify and expose chemical compliance indiscretions as part of due diligence and use the findings of a comprehensive review to shape the deal, or prevent it from occurring. Similar expertise is essential in transacting pesticide products and registrations issued under FIFRA and assessing the data packages supporting FIFRA registrations. Failure to identify and address these indiscretions can represent costly problems after the deal has closed.

Our Experience:

B&C's deep and expansive understanding of TSCA, FIFRA, REACH, and related domestic and international chemical control programs makes B&C uniquely well-suited to assist law firms, private equity firms, and related entities in conducting comprehensive and efficient due diligence and similar compliance reviews in mergers, acquisitions, divestitures, and related corporate transactions. B&C professionals bring a wealth of experience in working with legal and other experts in foreign jurisdictions. Over the years, we have carefully cultivated a network of highly-skilled professionals who can be called into action quickly and efficiently. Heading up global efforts are B&C attorneys, scientists, and regulatory consultants who have the global contacts and the underlying knowledge and experience to guide and/or coordinate matters taking place across jurisdictions.

Drs. Richard Engler, Joseph Plamondon, and David Peveler, each with doctorates in organic chemistry, have spent decades consulting with chemical companies on a broad range of chemical issues and have written extensively on chemical regulatory matters.

Dr. Jane Vergnes, with a Ph.D. in Human Genetics and over 25 years of experience as a senior toxicologist and product steward with major global chemical companies, offers clients her expansive understanding of toxicological testing within the regulatory frameworks of TSCA, FIFRA, and related international chemical programs and has a sophisticated ability to appraise quickly and decisively the regulatory bona fides of a company's corporate approach to compliance and stewardship. This ability is an essential component of transactional due diligence.

Senior Scientist Jason Johnston, M.S., holds two Master of Science degrees in Chemical Engineering Practice and in Technology and Policy from the Massachusetts Institute of Technology, and has more than 25 years of experience in the field of risk assessment. He is well-suited to assist clients in understanding the exposure potential of a key product or products targeted for acquisition.

Lara Hall, M.S., RQAP GLP, has been assisting clients for over a decade in thinking through strategic and efficient chemical testing plans to support the introduction and maintenance of chemicals on a global scale. Lara's shrewd eye can quickly assess the chemical testing capabilities of a targeted company and provide a sophisticated assessment of the target's strengths and weaknesses, and what this means in terms of the deal.

Karin Baron, M.S.P.H., has spent 15 years in the chemical and personal care industry and has extensive experience with assisting companies achieve compliance with domestic and international Globally Harmonized System of Classification and Labeling of Chemicals (GHS) requirements. GHS compliance is another area frequently overlooked in M&A due diligence and the consequences of not detecting deficiencies in this important product labeling area can be costly if not catastrophic.

What We Do:

B&C professionals are highly experienced in assessing legal and regulatory issues pertinent to transactions in the chemical sector. We assist clients in a wide range of areas, including specific chemical product reviews, product line reviews, and general compliance programs. Areas in which we routinely advise clients include the following:

  • Conduct due diligence reviews under TSCA, FIFRA, REACH, K-REACH, and related domestic and international chemical regulatory programs and quantify the implications of non-compliance in the context of due diligence.
     
  • Conduct in-depth compliance assessments of targeted product lines driving the "deal" to ensure all product components are compliant and, if not, assess quickly options for proceeding.
     
  • Offer strategic counseling on product and product line acquisition to private equity firms, corporations, and related parties wishing to expand their corporate holdings.

Representative Engagements:

B&C professionals routinely:

  • Conduct detailed evaluations of global chemical companies that are targets of mergers, acquisitions, and/or divestitures and provide legal and scientific counsel on the regulatory, policy, and business implications of particular transactions.
     
  • Assist with the transfer of FIFRA product registrations as part of asset purchases and/or mergers.
     
  • Assist with corporate acquisitions, divestitures, and other transactions involving interest in the chemical sector.
     
  • Counsel private equity firms in assessing the compliance status and commercial value of targets of corporate transactions.
 
BERGESON & CAMPBELL, P.C.
2200 Pennsylvania Ave, N.W. Suite 100W | Washington, D.C. 20037 | (202) 557-3800 • (202) 557-3836 (fax) | www.lawbc.com
© 2017 Bergeson & Campbell, P.C. All Rights Reserved