By Christopher Kiermayr and Mark Errington
In a dynamic M&A driven market companies are increasingly confronted with the challenges of PMI.
While senior management tends to focus on keeping day-to-day business running smoothly and managing corporate assets and commercial aspects, the integration of HSSE can be overlooked or underestimated by the PMI leads, not necessarily because HSSE aspects are considered to be a low priority, but because of limited HSSE exposure and a underdeveloped understanding of critical aspects, issues, obligations and risks as well as opportunities. The resources required for a successful HSSE integration are often underestimated and thus not provided for in the PMI budget or 100-Day Plan.
Among the attendees of an ERM sponsored webinar on post-merger integration, seventy percent had been involved in more than five M&A transactions over the past ten years, however only fifteen percent of the participants described their HSSE integration experience as having been well-organized, engaged, well-resourced and ultimately successful. The large majority described their experience as having been “under-resourced”, “a learning experience”, “disorganized”, “frustrating”, “overwhelming” or “downright chaotic”.
These situations are exacerbated by the fact that, in most companies, the resources and funding available to support integration decline rapidly over time once the transaction has closed. Thus, even though the bulk of integration activities are yet to be completed or even started when the deal is announced, planning and prioritizing and budgeting these activities should ideally be initiated pre-closing as part of the due diligence process, and underlying HSSE integration needs must be communicated to corporate management early on to allow for appropriate allocation of both CAPEX and OPEX to drive a successful PMI process.
A slow start to HSSE integration can adversely affect business continuity, create unnecessary risk and liability exposure as well materially inhibit the leveraging of deal driving synergies, HSE leaders should develop a clear vision of their priorities for the first hundred days of a PMI before the merger is completed or the acquisition is closed. If this is not done, integration plans might lack clear direction, rendering integration activities cumbersome, inefficient and ineffective.
Read more on leveraging the full potential of PMI through HSSE integration
Christopher Kiermayr is a Partner at ERM in Germany and Mark Errington is a Partner at ERM in the United Kingdom.