The reality of limited resources, tight budgets, downsizing, & varying levels of organizational EHS risk makes a seamless transition seem like a fairy tale. Learn how to expect the unexpected for a more realistic, but still happy, ending.

In an ideal world, every merger or acquisition would be preceded by exhaustive environmental due diligence, after which all environment, health, safety, and sustainability (EHS&S) gaps would be addressed and all disparate practices seamlessly merged, and everyone involved would live happily and harmoniously ever after. In the real world, however, it’s never quite that easy.

Besides the fact that EHS&S is not always included in the due diligence process, there is often the issue of highly confidential transactions for which no due diligence takes place at all. Consequently, we are seeing many organizations stumbling post-acquisition. As companies increasingly rely on internal resources for this crucial integration phase, they are often butting up against the reality of limited resources, constrained budgets, downsizing, and varying levels of organizational EHS risk, limiting what can realistically be done to merge the two companies successfully and safely.

Clearly, a new (non-fiction) story is needed. Below, we’ll talk you through the critical period after an acquisition and help you determine when to call for backup.

Expecting the Unexpected (and Planning for it)

Perhaps the most important thing to keep in mind when supporting an integration is to plan ahead whenever possible. There is no such thing as being too prepared or having too much information about the organizations being combined.

An expansive view of due diligence leads to better business planning, more informed negotiations, and better deals. By thinking beyond the purchase price to include the anticipated costs of integration and acquired risk, you ensure that the price really is right. The alternative here is aiming to keep the due diligence process as inexpensive as possible, but this is short-sighted. The smarter, more strategic approach is to think beyond the purchase price to understand your true acquisition cost and how this transaction will fit into your big-picture business strategy.

Remember, risk is the key component to evaluate during the due diligence process, and to consider when negotiating purchase terms, but don't overlook opportunities to add value. By fully understanding a target facility’s sustainability and resiliency, the buyer may find areas where additional value can be extracted after the sale, saving them money in the long run.

Guarding Your Brand

Consumer perceptions have real impact. Across all industries, brand reputation and consumer perception are increasingly critical, and avoiding brand risk is vital to the health and strength of the business overall. Including EHS and sustainability in your due diligence gives you the opportunity to ask: Does the acquisition/partner have existing issues that could impact the brand? What about each individual facility? What will it require to meet your standards?

One common scenario we see is when a non-manufacturing company acquires a manufacturing organization and suddenly has to make the leap from low-risk to high-risk EHS operations. Another is when the organization being acquired isn’t a true manufacturer, but does have an innovation lab, product repair shop, or other mechanical facility that is subject to more extensive regulations and risks. It’s also common to discover that one or the other organization has underdeveloped waste disposal or other processes that can potentially spell trouble.

Even if EHS&S is not involved in the due diligence phase, you can plan ahead by developing post-acquisition processes that have agreement from all stakeholders. Then post-acquisition, EHS&S can quickly gather information to discover critical risks and implement immediate corrective actions, followed by development of a longer-term integration road map with key stakeholders. Remember, the process is just as important as the information.

Forging Your Fellowship

So often, EHS concerns are focused on regulations, risks, and liabilities. However, when EHS managers turn to the integration phase, it’s all about people, communications, and cultural integration. Sure, policies, programs, management systems, and EHS compliance comprise your core metrics and goals, but accomplishing those metrics and goals requires onboarding of the entire EHS management structure. Onboarding requires good communication and buy-in from the target EHS team; without that, integration will be stifled.

One thing to think about, whether during pre-acquisition due diligence or post-acquisition discovery, is a proper assessment of the target EHS management team, their culture, and their ability to communicate and assimilate into the acquiring organization. Achieving buy-in from the key stakeholders in the acquired organization by creating a sense of support and resourcing is a must.

It’s important to have a common practice that should be followed once a deal has been communicated and the various departments are given the green light to spring into action. This will look different at every organization, but the important thing is to have a plan and then make sure everyone understands that plan. Even if no process is currently in place for your organization, you can still take the lead on developing an EHS&S-focused plan to take you through discovery and integration effectively. (Not sure what that looks like? This can be another good place to call for backup in the form of external experts.)

By keeping the lines of communication open and sharing information as transparently as possible between functions and throughout the company, the integration process becomes much more manageable. Departments should share their findings with one another, reducing re-work and uncovering efficiencies and opportunities that can benefit everyone.

The Third-Act Twist

When slip-ups occur and complications arise, companies find themselves in the position of having to pay for help to fix the problem plus the cost of operational disruptions. A better approach is to be proactive, not reactive. Plan to actively investigate and integrate all aspects of the old and new businesses that touch EHS&S, including corporate structures, policies, programs, and culture. By looking beyond regulatory requirements, you better position yourself to prevent disruption and help the business grow safely, sustainably, and responsibly.

In cases where no one in the acquiring organization has the expertise to understand and address compliance issues with the new acquisition, this can be a good time to ask for help. Calling in experienced M&A consultants can help fill in the gaps, providing extra power and energy to make the initial transition, and then facilitating the handoff back to the internal team.

A Happy Ending for All

By preparing for the unexpected, bringing in reinforcements as needed, and communicating early and often, you can facilitate a safe and successful transition. This careful planning and increased EHS&S visibility means you’ll not only keep people and property safe and compliant, but you’ll also be protecting the organization from unnecessary risk and perhaps even creating value along the way. Now that’s a story worth telling.

If you need extra post-acquisition support during this important transition, contact us today.

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