After decades of economic globalization, regulation of chemicals in the manufacturing and distribution of finished goods has become commonplace. Failure to understand and manage the environmental or human health risks posed by chemicals that are the building blocks of products marketed by a company can have a significant and deleterious impact on that company—a risk that is particularly acute for those with complex, global supply chains and international distribution. This is also true for mergers and acquisitions transactions (M&A transactions) involving such companies. The proposition that global chemicals regulation—including regulations focusing on chemicals within specific products such as cosmetics, biocides, clothing, food additives, and electronic equipment—should have a role in environmental, health, and safety (EH&S) due diligence may seem unusual. However, failure to perform due diligence on the target company’s chemicals use and management in manufacturing and supply chain operations could result in a flawed valuation of the transaction, reduced return on investment, loss of market access, reputational harm, and legal liabilities. Conversely, a thorough review of the target’s compliance with chemicals regulations can aid the identification of potential liability risks, while promoting their timely and effective management.
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