Due diligence has been part of business transactions for decades. The version most teams rely on today centers on the property: what’s in the ground and what that means for the site. For per- and polyfluoroalkyl substances (PFAS), also known as “forever chemicals,” it doesn't go far enough.
A standard Phase I Environmental Site Assessment (ESA) follows ASTM International (ASTM) E1527, which focuses on hazardous substances defined by the US Environmental Protection Agency (EPA) under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and petroleum products. The EPA regulates perfluorooctanoic acid (PFOA) and perfluorooctane sulfonate (PFOS) under Superfund, but thousands of other PFAS variants sit outside the standard Phase I scope. You can complete a Phase I ESA, meet All Appropriate Inquiries (AAI), earn liability protections, and still walk into a deal without evaluating one of the contaminants most likely to cause trouble later.
Meeting AAI doesn't make you untouchable, nor do historic signoffs erase all future costs. Acquire an operating business, and you may inherit PFAS liabilities that predate anyone's awareness of the risk.
Why PFAS are different
PFAS behave differently. Four distinct traits directly impact deal strategy:
- Perception runs ahead of science: Public concern over “forever chemicals” drives lawsuits, fines, and third-party claims far faster than a typical petroleum spill. This creates immediate brand and litigation exposure.
- Regulations and regional trends keep moving: A Phase I ESA captures a single moment in time. But with shifting regional contamination trends and state-level thresholds, a facility that is compliant on closing day can trigger costly mandates six months later.
- PFAS are ubiquitous: Low concentrations exist across water systems nationwide. Offsite plumes, neighboring properties, and shared wastewater infrastructure can easily drag a buyer into multi-party source tracing, stalling deal timelines even if the target site never used PFAS.
- Technology lags rules: Unlike petroleum or solvents, PFAS lacks simple, off-the-shelf remediation options or chemical alternatives at commercial scale. This makes long-term liabilities difficult to price into negotiations.
To navigate these moving parts, start by evaluating your PFAS risk management drivers.
Look before you sample
A common pitfall in due diligence is collecting data just for the sake of having it. When it comes to PFAS, every piece of data you gather should answer: What does this mean to the deal? Why do I need to do this now? Why can't it wait?
Sample or test for PFAS, and you'll often find it. Once that data exists, it can potentially lead you into mandatory reporting, price negotiations, and even litigation. That's why many now wait until they have a clear business reason to sample. Talk to counsel and your environmental consultants before you collect anything.
Widen the lens
Instead of jumping straight to soil or water sampling, evaluate risk at the enterprise level. Treat a standard Phase I ESA as the absolute minimum, not the final step. To build a complete picture of transaction risk, rethink how you sequence your due diligence:
- Run a baseline screening first: Before ordering a Phase I ESA, complete a high-level operational PFAS risk screening tied to your business goals.
- Work backwards from the deal: Determine how PFAS exposure impacts valuation and separate what must be resolved before closing from what can wait. This keeps the focus strictly on material deal-killers and controls costs.
- Model costs quantitatively: Move past qualitative risk ratings. Pick your three most probable scenarios, like inherited compliance programs or enforcement actions, and model the financial impact.
- Audit the supply chain: In mergers and acquisitions (M&A) deals, inheriting ongoing supply chain reporting obligations can sometimes exceed physical cleanup costs. Mapping how PFAS enter, move through, and leave an operation mitigates risk before you take ownership.
Turn risk into deal value
Good due diligence will pay for itself 10, 20, 100 times over. The insights you gather set precise PFAS escrows, adjust purchase prices, and shape smarter indemnities.
They shift your insurance position, too. Most carriers now write PFAS exclusions, and baseline data may allow you to negotiate coverage instead of accepting PFAS exclusions blindly. Effectively structured and well-thought-out due diligence can set an operational baseline for your compliance program well after closing.
So, before your next deal closes, ask: have you actually looked for PFAS or just met the minimum requirements for Phase I?
