Environmental Insurance as M&A Risk Management Tool


Summary

This practice note explores the important role that environmental insurance can play in mergers and acquisitions (M&A) by allowing the parties to transfer identified and unknown environmental risk to a third-party insurer. M&A transactions frequently involve the transfer of commercial real estate as well as current and historic business entities. Generally speaking, M&A transactions are structured in one of three ways: stock deals, where the buyer acquires all of, or a controlling interest in, the outstanding stock in the target; mergers, where the buyer (or newly created subsidiary of the buyer) and the target merge into a single entity; or asset purchases, where the buyer and the target negotiate the particular assets and liabilities of the target to be acquired. In both the stock deal and merger, the surviving entity retains ownership of all of the target’s assets and liabilities. In an asset deal, the buyer and the target often divide the assets and liabilities, with each emerging ...