Post-merger integration - a practical perspective - Environmental Resources Management (ERM)
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Post-merger integration - a practical perspective

14 April 2016

By William Butterworth

Whether EHS leaders work for an acquiring, acquired, or divested business, company transitions are always chaotic events. People, programmes, procedures, and IT systems that were previously understood and relied upon may suddenly cease to exist, forcing teams to forge new relationships and adopt new programmes and procedures - or suffer the consequences. Even worse, the EHS vision, strategy, and approach deployed by the acquiring and acquired companies might be light years apart. 

Cultural alignment
Surveys consistently note that cultural alignment is one of the biggest post-merger challenges faced by EHS leaders. The way that companies approach EHS compliance, work place safety, risk management and sustainability provides valuable insight into a company’s EHS culture. Failing to understand and overcome the cultural differences separating two companies can have disastrous consequences for EHS performance — increasing the frequency and severity of health and safety incidents or environmental releases, larger and more frequent enforcement actions, and even fatalities. The merger frenzy that seems to be continuing will require an increasing number of companies to identify and overcome cultural barriers or risk the future success of their EHS programs.

Policies, programmes and procedures
Even when cultures align, a lot of work still needs to be done to meld two companies into one. Which company’s policies, programmes, and written procedures will prevail? Who will be in charge of individual programmes and the overall organisation? Which IT systems will be used for EHS going forward? How will EHS data be migrated from the old company to the new one? Rewriting a business or even facility’s procedures to meet the acquirer’s expectations and developing new programmes to support those procedures can consume hundreds of hours of time over an extended period of time, all of which is a distraction for the day to day ongoing management requirements.

Pre-merger due diligence - an important step
There is also the need to make sure the current status is understood before any change can be implemented. Quite often the strategic nature of the transaction means that pre-merger due diligence is not undertaken. This practice deprives EHS leaders of valuable baseline information on the target’s history, programmes, and compliance, which is needed to prepare effective post-merger integration plans. Lacking detailed plans for Day 1, Day 100 and even Day 1,000 means that many EHS integrations can be directionless, inefficient and ineffective. EHS leaders must ensure that they acquire sufficient baseline information on their acquisitions to fully understand material liabilities, compliance deficiencies, and required capital investments.

Therefore it is important that through this process EHS leaders must:

  • Embrace change - a strategic business decision has been made to do the deal and so be proactive with regards to the opportunity that this presents to the EHS lead and their team.

  • Understand the merger integration mechanics - to be effective in this time of change it is important to understand what is expected, the timelines involved, rules of engagement and communication, legal constraints and the funds available to support the process.

  • Prepare for change – this is an important time to make sure that everything is in order: permit status, investment requirements, liability management, and the structure of the EHS team that is required.

It will then also be necessary to keep aware of and appraise the culture of the newly merged business and make sure that as an EHS leader you are taking responsibility of the integration process from an EHS perspective.

Delivering results
Whether companies are involved in an acquisition, divestiture, or spin-off, EHS leaders must ensure that their programmes continue to deliver strong results. To accomplish this, EHS leaders must start with an understanding of the baseline conditions and EHS cultures of the parties involved. With this knowledge, integration plans that address legacy issues, current performance, and future aspirations can be implemented effectively for the newly merged company in a way that gets the attention of the board and funds that are required.

For more information on pre or post-merger integration please contact:

William Butterworth
PMI Partner Lead - UK&I
william.butterworth@erm.com

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