Guidelines for Process Safety Acquisition Evaluation and Post Merger Integration

Executive Summary 1

Why this Guideline? 1

Chapter 1 An Overview of Process Safety 3

Chapter 2 The Merger and Acquisition Process 5

Chapter 3 Screening Potential Candidates 7

Chapter 4 The Due Diligence Phase 9

Chapter 5 Developing the Integration Plan 13

Chapter 6 Implementing the Integration Plan 18

Chapter 7 M&A In The Future 22

The Appendices 24

1 An Overview of Process Safety 27

1.0 Courtney’s story – continued 27

1.1 Why this Guideline? 28

1.2 Understanding the basics 31

1.3 Hazard versus Risk - Is there a Difference? 32

1.4 Good Injury Rate Does Not Equal Good Process Safety Performance 34

1.5 Understand the Hazards of Chemicals Handled on Site 36

1.6 Don’t forget about the Dust Explosion Hazard 40

1.7 Unique Considerations at Facilities that Handle HHCS 41

1.8 Resources for Process Safety 43

2 The Merger and Acquisition Process 47

2.0 Courtney’s story – continued 47

2.1 Changing World of Corporate Profiles 48

2.2 Overview of the M&A Process 49

2.3 Scalability (big/small; single site verse multiple site deals) 52

2.4 Key Terms and Concepts 53

2.5 Process Safety in the M&A process 57

2.6 Financial Strategists can have high impact on process safety systems 60

3 Screening Potential Candidates 63

3.0 Courtney’s story – continued 63

3.1 Using Public Domain Information for Screening 64

3.2 Using a Checklist to Identify Potential Process Safety Issues 74

4 The Due Diligence Phase 77

4.0 Courtney’s story – continued 77

4.1 Introduction 78

4.2 The Divestment Due Diligence 81

4.2.1 The Checklist 82

4.2.2 The Internet and Intranet Searches 82

4.2.3 Pre-site Visit Review 83

4.2.4 The Due Diligence Site Visit and Document Review 84

4.2.5 Vendor Due Diligence Report 87

4.2.6 Valuation 89

4.2.7 Data Room 91

4.2.8 Question and Answer Management 94

4.2.9 Reverse Due Diligence 96

4.2.10 Did the Deal Close? 114

4.3 The Acquisition

4.3.1 The Internet Search and Initial Data Gathering 99

4.3.2 Vendor Due Diligence Report 100

4.3.3 Data Room 100

4.3.4 Due Diligence Valuation for Bid 103

4.3.5 Pre-site Review 104

4.3.6 The Site Visit and Document Review 107

4.3.7 Due Diligence Report and Valuation 110

4.4 Did the Deal Close?

5 Developing the Integration Plan 117

5.0 Courtney’s story – continued 117

5.1 Developing the Integration Plan and Process 118

5.1.1 Step 1- Establishing the Boundaries for the Integration Process (i.e. Establishing the Integration Strategy) 120

5.1.2 Step 2 - Establishing the Expectations for the Process Safety Program 124

5.1.3 Step 3 - The Process Safety Integration Team 127

5.1.4 Step 4 - Assessing the Gap between the Current Approach and Expectations 131

5.1.5 Step 5 - Developing the Action Plan 136

6 Implementing the Integration Plan

6.0 Courtney’s story – continued 153

6.1 A Generic Change Model 154

6.2 The Integration Path Forward 160

6.2.1 Step 1 - Get the 'hearts’ of the newly acquired business leads to accept the Vision and Strategy for the integration process 160

6.2.2 Step 2 - Appointing and chartering Integration Implementation Teams 161

6.3 An Alternate Bottom-Up Approach to Integration 175

6.4 Differences Between Facilities, Business Units 178

6.5 Step 3 - Working Through the Implementation Itself 179

7 M&A in the Future 185

7.0 Courtney’s story – continued 185

The Appendices 193

Appendix A – M&A Process Safety Checklist 193

M&A P.S. Checklist – Commercial Evaluation Phase 194

M&A P.S. Checklist – The M&A Team 201

M&A P.S. Checklist – Data Room Information 203

M&A P.S. Checklist – Planning the Site Visits 217

M&A P.S. - Issues to Be Investigated During the Site Visits 219

M&A P.S. Checklist - Process Safety Issues to Be Considered 235

M&A P.S. Checklist - Assessing Major Hazard Risks 241

M&A P.S. Checklist - Process Safety Management & Culture 245

M&A P.S. Checklist - Process Safety Staffing Issues 253

M&A P.S. Checklist - Hazard Identification Issues to Evaluate 255

M&A P.S. Checklist – Management of Change Issues to Investigate 257

M&A P.S. Checklist - Mechanical Integrity Issues to Investigate 261

M&A PS Checklist – Process Safety Issues to Examine 265

M&A PS Checklist - Process Safety Procedures to Examine 267

M&A P.S. Checklist – P.S. Audit Issues to Consider 271

Appendix B – An Exemplar Integration Plan & Budget 273

Guidance for Using the Plan and Budget Spreadsheets 275

An Exemplar Integration Plan 279

Exemplar Integration Budget 301

References 309

Index 313