Guidelines for Acquisition Evaluation and Post Merger Integration

322 Pages·2010·13.38 MB·English

GUIDELINES FOR PROCESS
SAFETY ACQUISITION
EVALUATION AND
POST MERGER INTEGRATION
This book is one in a series of process safety guideline and concept books published by the
Center for Chemical Process Safety (CCPS). Please go to www.wiley.com/go/ccps for a full
list of titles in this series.
It is sincerely hoped that the information presented in this document will lead to an even
more impressive safety record for the entire industry. However, the American Institute of
Chemical Engineers, its consultants, the CCPS Technical Steering Committee and
Subcommittee members, their employers, their employers' officers and directors, and
ioMosaic, Inc., and its employees do not warrant or represent, expressly or by implication,
the correctness or accuracy of the content of the information presented in this document. As
between (1) American Institute of Chemical Engineers, its consultants, CCPS Technical
Steering Committee and Subcommittee members, their employers, their employers' officers
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or misuse.
GUIDELINES FOR PROCESS
SAFETY ACQUISITION
EVALUATION AND
POST MERGER INTEGRATION
Center for Chemical Process Safety
New York, New York
Center for Chemical Process Safety
©WILEY
A JOHN WILEY & SONS, INC., PUBLICATION
Copyright © 2010 by American Institute of Chemical Engineers, Inc. All rights reserved.
A Joint Publication of the Center for Chemical Process Safety of the American Institute of Chemical
Engineers and John Wiley & Sons, Inc.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Guidelines for process safety acquisition evaluation and post merger integration.
p. cm.
"A Joint Publication of the Center for Chemical Process Safety
of the American Institute of Chemical Engineers
and John Wiley & Sons, Inc."—
Includes index.
ISBN 978-0-470-25148-5 (cloth)
1. Chemical industry—Management. 2. Chemical industry—
Safety regulations. I. American Institute of Chemical
Engineers. Center for Chemical Process Safety.
HD9650.9.G85 2010
660.068'5—dc22 2010005157
Printed in the United States of America.
10 9 8 7 6 5 4 3 21
CONTENTS
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 27
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
V
VI GL ACQUISITION EVALUATION & POST MERGER INTEGRATION
2 47
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 63
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 77
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
4.3 The Acquisition 97
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
CONTENTS Vil
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? 114
5 117
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
6 153
Implementing the Integration Plan 153
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
7 185
M&A in the Future 185
7.0 Courtney's story - continued 185
The Appendices 193
viii GL ACQUISITION EVALUATION & POST MERGER INTEGRATION
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 EXAMINE265
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
ONLINE FILES ACCOMPANYING THIS BOOK
This book is accompanied and complimented by two spreadsheets or
tools you can load onto your computer and use to assist with
building your own M&A process safety toolkit. These spreadsheets
provide:
• Checklists of process safety issues that should be
investigated or addressed in a proposed acquisition or
merger,
• A draft of a possible integration plan of activities a reader or
user of this Guideline may have to complete as part of
merging together the process programs of newly acquired
facilities with their own current operations, and
• A draft integration budgeting tool, to help with estimating
the resources and costs that an organization may have to
make provisions for when integrating two process safety
programs together.
To access the spreadsheets, go to:
http://www.aiche.org/downloads/CCPS/Mergers_and_Acquisitions.zip
To unzip the files for use, enter the password: CCPS_Mergers
Email [email protected] with questions.
IX
Acronyms and Abbreviations
ACC American Chemistry Council
AIChE American Institute of Chemical Engineers
API American Petroleum Institute
CAPEX Capital Expenditure
CCPS Center for Chemical Process Safety
CFR Code of Federal Regulations
COMAH Control of Major Accident Hazards (UK HSE
Regulation
CSB U.S. Chemical Safety and Hazard Investigation
Board
DD Due Diligence
EPA U.S. Environmental Protection Agency
EU European Union
HHC's Highly Hazardous Chemicals
HSE Health and Safety Executive (UK)
IPO Initial Public Offering
IT Information Technology Systems
JV Joint Venture
KPI Key Performance Indicator
MI Mechanical Integrity
M&A Merger and Acquisition
MOC Management of Change
NFPA National Fire Protection Association
NGO Non-Governmental Organization
NMRIS Near Miss Reporting Information System
OPEX Operating Expenditure
OSHA U.S. Occupational Safety and Health
Administration
P&ID Piping and Instrumentation Diagram
PDF Portable Document Format
PHA Process Hazard Analysis
PS Process Safety
XI