Overview of Situation
This 37-year-old manufacturing company had seen its revenue and profits decline in recent years and the founder-owner was ready to retire due to health problems. The sellers owned the building and wanted to sell it with the business. The building had significantly more value than the business and was key to the transaction.
Pacific Business Sales was engaged as the business broker by the owner/seller and found an industry buyer for the building and business, however, after an offer was accepted the Phase 1 Environmental Study found that while the property had no contamination, there was an old, and now closed, battery manufacturing facility nearby that was part of an EPA Super Fund clean up. There was a toxic plum that had a risk of moving toward the facility and could contaminate the soil.
Based on the risk of future contamination, the SBA lender would not lend on the real estate and this would kill the deal.
Approach & Solution
Pacific Business Sales found Environmental Insurance to cover the risk of future contamination from the plume and the cost of clean-up.
Results & Conclusion
With this policy in place, the SBA lender was satisfied that the risk of loss due to the nearby plum was covered and approved the loan. The Seller paid for the Environmental Insurance at the close of escrow and the transaction for the sale of the business and building closed successfully.