Mergers & Acquisitions Case: Specialty Chemicals Manufacturer - Oil Services
Evaluation of Materiality, ESAs, Compliance Reviews & Industry Benchmarking

A leading New-York based private equity group was contemplating the acquisition of a large independent specialty chemical fluids supplier that operated in the oil and gas industry. The targeted company was an industry leader in the blending, batching, and delivery of these chemical products, and provided services on-site at drilling facilities. The target also owned a substantial private transport fleet and operated custom product-blending, storage and manufacturing facilities in locations across the U.S.

GaiaTech was retained to evaluate the potential for material environmental concerns associated with this acquisition target. We were also asked to conduct a competitive industry analysis, comparing the company's compliance and operations to those of its industry peers. Given our access to proprietary, subscription-based environmental databases and our previous experience with similar companies in the industry, GaiaTech was uniquely positioned to conduct this review.

Our scope included reviewing existing Phase I Environmental Site Assessment reports provided by the target company for its facilities, to identify and assess any concerns about contamination that may be material to a financial transaction. Information in these reports was supplemented by discussions with company representatives and their environmental advisors. GaiaTech also reviewed applicable regulatory information on a national and state-specific level to understand the universe of potential regulatory issues that apply to the business.

Furthermore, GaiaTech evaluated the compliance status of the company's direct competitors within local markets, comparing their records with those of the target company, allowing us and our investor client to gauge the sophistication of compliance efforts within the industry and at the target's competitors, and to evaluate and the effectiveness of the target's current environmental management. We also examined emerging issues in the industry to understand any potential future impact to operations. Observations and trends were documented, analyzed, interpreted and reported in meaningful business and financial terms to the client.

GaiaTech's work ensured that our client was provided with useful and workable information regarding the environmental status of the target company in the context of its specialized industry and locality, without their having to conduct additional intrusive and costly due diligence in advance of the prospective transaction. Our client used GaiaTech's analysis to make informed and confident financial decisions about the environmental risk associated with the business and its viability as a platform company.