Studies in Environmental Health and Safety
David Myers
Project Proposal
Corporations that are looking to expand their businesses and grow their portfolio by acquiring
existing smaller companies face many challenges. There are so many facets that corporations
must take into account like human resources, union contracts, finance, and information
technology issues. Another challenge that many don’t consider are the environment, health, and
safety issues that come with acquiring a new business. This is especially tough for corporations
that have very mature EH&S management systems. Usually the newly acquired companies do
not have an equivalent EH&S management system and don’t even meet the compliance
standards of where they are in the world. EH&S acquisition integration is what my project will
be focused on. Through the use of case studies I will show how it is done successfully and not
successfully. I will also show how large corporations manage the EH&S acquisition process,
and also share my EH&S integration process and lessons learned over the time that I have had
the job at Pratt & Whitney.
The first thing that a corporation must do before they acquire a new company is follow a due
diligence process. This is usually done by both a corporation representative and an outside
contractor that completes the technical aspects of the due diligence process. This is laid out in
two separate reports that the contracted company puts together. The first is a called a phase 1
report that looks at a high level of environmental & health/ safety issues that the company has at
their site or various sites depending on the acquisition. Once that report is completed the
acquiring corporation’s legal team reviews the report and decides whether a phase 2 is necessary.
A phase 2 is usually done if the acquiring corporation sees some liability issue with the phase 1
report. The phase 2 report will focus on those liability issues from the phase 1 report. Once the
phase 2 is completed the acquiring corporation will review and decide on any conditions that
they would like to put on the deal. This is usually done with reserves that are set aside for future
liabilities that may present themselves after the deal is complete. Once this is all agreed upon the
deal is done and the hard work begins.
One of the issues with the due diligence process is confidentiality and not all the right players
are usually involved with the decision making process. This is done at the executive and legal
levels. All they are going on are the phase 1 & 2 reports, and the advice of the EH&S Vice
president. Executives have a 30,000 foot level view of the acquisition, and can’t see the real
EH&S issues of the acquisition as a trained day to day EH&S professional can do by spending
time with the acquisition leadership and local EH&S professional. Usually the decision to
acquire the new business is made for financial reasons unless there are strikingly large
environmental or safety issues from the reports. This is where the EH&S compliance manager
or EH&S acquisition integration manager get involved and starts the internal process of EH&S
integration with the new company. The first area that the integration process will focus on is
compliance. The new company will undergo a compliance audit at the newly acquired site or
sites. This can be a complicated process depending on the acquisition because of the different
country laws and regulations that need to be considered during the compliance audit process.
This is either done by the compliance department of the acquiring company if they have
experience in the area or they will have a contractor in the area do it so that there is some
expertise in the compliance audit. Once the compliance issues are identified a corrective action
plan is put together to address all findings with timelines and owners attached to each. This is
what the main focus is on in the first 6 months of the integration. Along with the compliance
audit the EH&S integration manager will have a meeting with the newly acquired company
management and outline the EH&S management system and expectations of the corporation.
There is also a training plan that is put together for the different levels of management within the
company to bring them up to speed on the EH&S management system. This needs to be done in
small doses as to not overwhelm the new management of all the requirements, goals, and
expectations that come with the EH&S management system. This is also a good time for the
integration manager to see how committed the management team is to implementing the EH&S
management system and correcting the compliance issues that are found during the compliance
audit.
Once the compliance corrective action plan is closed out the integration site has to implement
the acquiring corporation’s EH&S management system. The first thing to do is develop an
implementation plan using the existing company requirements of the acquiring company. There
are four stages of integration that I will go into detail in the project that each integration site goes
through. The four stages are preparation, cooperation, integration, and implementation.
Each mature corporation has its own integration process and I will outline 3 corporation’s
processes in this paper. The 3 corporations I will focus on are General Electric, Pratt &
Whitney, and 3M. I will focus on what their different timelines are and how they implement
their own management system at new acquisitions. I will focus on their results with facts and
figures that show acquisition integration improvements, and specific examples of success stories.
The last piece of the project is what does the future hold for acquisition integration. I feel that
companies are going to be even more detailed in their approach before they acquire a company in
the future. There is a big emphasis now on sustainability and how a company’s image is viewed
by the public. Large corporations are going to want to see that the companies they are acquiring
have sustainable products, or the ability to be sustainable with a return on investment for the
acquiring corporation. They are going to want to see life cycle assessments on the products that
they are going to support, and that the company culture is there to foster sustainable facilities,
suppliers, and workforce.