This document summarizes a presentation on maintenance and environmental acquisition pitfalls. It discusses common pitfalls such as having an unclear understanding of the deal specifics and liability types. It also discusses defining liabilities, quantifying liabilities through due diligence activities like reviewing documentation and site inspections, and challenges with relying on previous assessments. The presentation emphasizes properly scoping assessments, evaluating consultant qualifications, and integrating newly acquired sites after transaction close. Post-transaction priorities include addressing any previously unknown liabilities and developing corrective action plans.

1. SIGMA Maintenance, Environmental & Safety Share Group
September 2016
San Antonio, Texas
Maintenance & Environmental
Acquisition Landmines

2. Perspectives and fine print
Maintenance & Environmental Acquisition Pitfalls
1Antea USA, Inc.

3. 1. Warm-up
2. Understanding the Deal
3. Defining Liabilities
4. Quantifying Liabilities
5. Other considerations
6. Portfolio Integration
Agenda
Maintenance & Environmental Acquisition Pitfalls
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4. What are some pitfalls that you have come across during Acquisitions?
Warm-up
Maintenance & Environmental Acquisition Pitfalls
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5. Pitfall #1: Unclear understanding of the Deal
Maintenance & Environmental Acquisition Pitfalls
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6. • Type of Transaction
• Asset portfolio
• Stakeholders and the Deal Team
• Liability Types and accountability
• Accessing asset information
• Confidentiality
• Seller provided information
• Asset inspection
• Reliable public sources of information
Educate yourself – Pre-planning considerations
Understanding the Deal
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7. Pitfall #2: Overlooking liabilities
Maintenance & Environmental Acquisition Pitfalls
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8. Types of EHS Liabilities – know where to focus
Defining Liabilities
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Compliance
Remediation
Third Party Obligations Civil, Criminal & Punitive
Natural Resource Damage
Occupational H&S
Abatement

9. Typical Liabilities Based on Transaction Type
Defining Liabilities
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Real Estate
Acquisition
Business Unit
Acquisition
Business Merger or
Acquisition
Joint Venture,
Leveraged Buyout
Credit Facility
(Collateral)

10. Other Factors Affecting the Evaluation
Defining Liabilities
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Or…

11. Pitfall #3: Not all liabilities can be defined
Maintenance & Environmental Pitfalls
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12. Collecting Information
Quantifying Liabilities
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1) Review of Seller-provided documents
2) Review of publicly available information
4) Visual inspection of selected assets
5) Visual inspection of all assets
7) Intrusive Assessments
3) Use Commercial Database Services
6) Phase I ESA (under ASTM)

13. • Typically in a data room
• May require the buyer to acknowledge that it has reviewed and
accepted the seller’s information as complete disclosure.
• Important that the buyer review all information provided by the seller
1) Seller Provided Documentation
Collecting Information
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PROS
• Inexpensive, fast, potential to identify wide
range of property and corporate liabilities
• Can effectively communicate large amounts
of data
• All parties have access to the same
information
CONS
• Information controlled by Seller
• Difficult to verify and to glean relevant data
• Difficult to establish timelines and historical
significance of documents
• Seller may limit ability to copy or download
• Seller can restrict time allowed for review in
competitive bidding and auctions

14. • Obtained anonymously or through information requests (FOIA).
• If public-held company, utilize annual reports and SEC filings
• Regulatory Agency Databases and files through on-line access points or
FOIA requests; Keyword and topical searches on-line; Local Government
archives for historical and building information
2) Review publicly available information
Collecting Information
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PROS
• Inexpensive if on-line or electronic means
utilized
• Can be performed anonymously
• Buyer can control information sources
CONS
• Need key information about each asset
• Information is often incomplete or dated
• Proprietary data will not show in searches
• Cannot be anonymous if using FOIA request
• Some files must be viewed in-person

15. • Provide environmental and other types of information filtered by
geographic coordinates (i.e. radius reports)
• Examples: EDR, ERS, ERIS
3) Commercial database services
Collecting Information
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PROS
• Meets requirements for AAI
• Maintains anonymity
• Search criteria widely accepted, repeatable,
recognized, and consistent
• Ability to geocode the information saves
considerable search time
• Some unique and proprietary databases are
available
CONS
• Exact location information is needed
• Geocoding can be unreliable
• Can contain irrelevant and repetitive data
• Source databases don’t translate well
• Often incomplete or dated results
• Data on multi-tenant sites and government
installations can be jumbled and confusing

16. • Visual inspection of selected representative assets
• Visual inspection of all assets
• Often performed in conjunction with historical reviews and databases
• Adds confidence to database searches
4) & 5) Visual Inspections
Collecting Information
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PROS
• Most effective way to observe and confirm
site information and operations
• Fills an important requirement to meet the
standards for all appropriate inquiry
CONS
• Time consuming and expensive for teams to
reach remote sites
• The brief inspection “snapshot” may not give
a reliable picture of typical facility operation
• Confidentiality and anonymity are difficult to
maintain

17. • Site-specific implementation of a program to collect samples of soil,
ground water, surface water, building materials and other materials
• Testing could include equipment and structures (such as tanks)
7) Intrusive Assessments
Collecting Information
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PROS
• Reliable, conservative approach leaves little
to speculation
• Results can inform further action and likely
to be accepted by regulatory agency if action
plan is needed
CONS
• Investigations can get expensive
• Time is needed which may not be practical
within an aggressive due diligence period
• Competitive disadvantage in an auction bid
• Creation of affect media information could
require disclosure to regulatory agencies;
• Potential damage and disruption of property
• Difficult to remain anonymous/ confidential

18. Collecting Information
Quantifying Liabilities
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1) Review of Seller-provided documents
2) Review of publicly available info
4) Visual inspection of selected assets
5) Visual inspection of all assets
7) Intrusive Assessments
3) Use Commercial Database Services
6) Phase I ESA (under ASTM)

19. • Screen all documents made available by the Seller
• Use the level of materiality to focus on relevant liabilities
• Tabulate all material findings and liabilities and separate those that
are accruable (can reserve)
• Speak the language of the decision makers
• What are costs?
• When and how will they be paid?
• Handling of non-compliance issues
Evaluating and Quantifying Liabilities
Quantifying Liabilities
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20. Pitfall #4: An ASTM Phase I is always required
Maintenance & Environmental Acquisition Pitfalls
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E1527-13

21. • Most common method for addressing potential liabilities where site
inspections possible
• Evaluation process is widely recognized and accepted
• Buyers of real estate protected from Superfund liability by performing
all appropriate inquiry (AAI), no benefits to leaseholders or Sellers
• Only satisfies the CERCLA AAI requirement
• Non-ASTM scope considerations must be added to identify
compliance concerns and hazardous building materials
• Poorly-written evaluations can identify environmental conditions that
are not significant or risky
Phase I Environmental Site Assessments
Quantifying Liabilities
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22. Pitfall #5: You can rely on previous Phase Is
Maintenance & Environmental Acquisition Pitfalls
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23. • Liability evaluation is project/client-specific –
single point in time
Reliance by Multiple Stakeholders
Quantifying Liabilities
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• Risk tolerance levels are project/client-specific
• Reliance agreements are best negotiated at the
beginning of a transaction so the requirements
of all stakeholders can be considered

24. Pitfall #6: All consultants are created equal
Maintenance & Environmental Acquisition Pitfalls
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25. • This is not a time for commodity pricing
• There is no such thing as over-
communicating
• When it comes to quantifying risk,
question the certainty of a single number
• The “state” of compliance for
assets/equipment is quantifiable
• They should have a plan for handling
inconsistent data
• There are no standard “REC” categories
Key Considerations when hiring consultants
Quantifying Liabilities
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26. Pitfall #7: This is a “one and done” project
Maintenance & Environmental Acquisition Pitfalls
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27. • The Goal of Integration
Align the newly acquired EHS organization to the existing organization and culture
while maintaining the necessary EHS programs
• Every transaction presents unique situations – the integration strategy
must be flexible
• Integration is bigger than EHS team
• Leverage your Consultant to learn about the Seller’s EH&S team
The importance of Integration (for EH&S)
Portfolio Integration
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28. • Look at Management System functions as
a guide
• Interviews with Key staff
• Identify important organization and
procedural issues to review
• Establish some metrics
• Determine how identified liabilities will
be handled
Preparing for Integration
Portfolio Integration
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29. • The due diligence assessment process may identify previously
unknown liabilities (non-compliance and contamination) known only
to the acquiring EHS Team
• Develop a corrective action plan
• Assign responsibilities
• Develop schedule for completion
• Determine non-compliance items that need to be disclosed to the
agency
• The seller may be at risk if the buyer identifies liabilities that create an
agency notification requirement
Post-transaction priorities
Portfolio Integration
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30. During your investigation, you identify a discoverable incident and your Contractor is legally obliged to
report it.
During your investigation, you find historic use of “methyl-ethyl death” (something other than
petroleum).
Example: a site used PCE historically and no investigation was conducted, was then bought/sold and now used as
retail fuel operations. PCE impact could be out there. Do you assess for PCE? Would it vary by state? Would you
use as potential leverage tool in liability quantification/purchase price negotiations? Ask for an indemnification?
The property has historic use of petroleum before UST Regs by EPA, and no subsurface investigations
ever conducted.
During your site visit, you identify significant staining, numerous regulatory violations or releases that
could be indicative of subpar management/compliance.
Same comment as above, but the state has LUST Trust Fund.
Other Pitfalls
Maintenance & Environmental Acquisition Pitfalls
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31. BET TER BUSINESS,
BET TER WORL D℠
Antea Group Offices
USA Headquarters
5910 Rice Creek Parkway, Suite 100
St. Paul, MN 55126, USA
USA Toll Free: +1 800 477 7411
International: +1 651 639 9443
Belgium
Roderveldlaan 1
2600 Antwerpen
Colombia
Calle 35 No. 7-25, Piso 12
Bogota, DC
France
29 avenue Aristide Briand - CS 10006
94117 Arcueil Cedex
Netherlands
Monitorweg 29
1322 BK Almere
www.anteagroup.com