EHS Support’s Three-Pronged Approach to Health and Safety Compliance in M&A Transactions

By: Justin Vanderpool

HSE compliance

When it comes to mergers and acquisitions (M&A), there are many often overlooked health and safety (H&S) compliance factors to consider. Ensuring that a target company has strong H&S protocols in place can not only protect employees and visitors but also shield the buyer from potential legal and financial liabilities. In this article, we will review a three-pronged approach to addressing H&S compliance as part of due diligence, drawing from real-world examples such as the catastrophic incident at the Texas City Refinery and the violations encountered by Dollar General.

Process Safety Management

Occupational Safety and Health Administration (OSHA) issued the Process Safety Management of Highly Hazardous Chemicals standard (29 CFR 1910.119), which contains requirements for the management of hazards associated with processes using highly hazardous chemicals. Process Safety Management (PSM) is particularly important if you’re acquiring an industrial facility that uses hazardous chemicals or processes and will want to pay close attention to the PSM program in place. Review the PSM program to ensure it captures any potential risks associated with the associated facility’s processes. Failure to do so can result in catastrophic accidents, as we’ve seen in several high-profile incidents over the years.

One notable example of the consequences of inadequate PSM post-merger is the Texas City Refinery explosion in 2005. Following the merger of two oil refining companies, insufficient attention was given to integrating and implementing effective PSM systems. The result was a devastating explosion that claimed the lives of 15 workers and injured hundreds more. This incident highlights the importance of thoroughly assessing and reinforcing PSM protocols during the due diligence process to prevent catastrophic accidents.

General Health and Safety Risks

In any  transaction, it is essential to address general H&S risks within the target company’s operations. These risks can vary depending on the industry, location, and specific activities involved. Examples of general H&S risks include inadequate training, insufficient emergency preparedness, and hazards related to slips, trips, and falls. Failure to identify and mitigate these risks can lead to severe consequences.

To illustrate the potential ramifications, consider the Dollar General case. The popular discount retailer faced substantial fines amounting to more than 15 million dollars since 2017 for multiple violations of H&S regulations. These violations included blocked emergency exits, unsecured storage of chemicals, and failure to provide adequate employee training. These general H&S risks should have been thoroughly addressed and resolved before any inspections to ensure the safety of employees and visitors.

Documentation of a Safety Management System

Documentation of a safety management system involves analyzing the target company’s safety statistics and comparing them to the company’s documented safety procedures. The goal is to ensure that the company is not just ‘talking the talk,’ but also ‘walking the walk’ when it comes to H&S compliance.

Comparing the experience modification (MOD) rate and injury claims statistics to the company’s documented safety procedures can indicate if the company’s safety procedures are not being followed properly.

In conclusion, H&S compliance should be a top priority in any M&A transaction. By using our three-pronged approach focusing on PSM, general H&S risks, and documentation of a safety management system, you can ensure that you’re not just buying a business but acquiring a culture of safety. Avoid potential enforcement and significant fines by prioritizing health and safety compliance in all of your mergers & acquisitions.

To learn more contact Justin Vanderpool



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