For every merger and acquisition that succeeds, more than half collapse. Of course, that hasn’t stopped companies from trying. In fact, Mergers and Acquisitions Magazine (Jan. 2000) reported that in the decade of the 1990s, merger and acquisition (M&A) transactions increased five times over the previous decade — and the trend does not seem to be slowing. PricewaterhouseCoopers (PWC) estimates that more than $260 billion was spent on M&As over the past five years alone. Yet, a study by PWC revealed that anywhere from 60 to 70 percent of M&As do not produce anticipated financial results, setting a likely course toward failure. When analyzing the reasons for such a dismal record, The Journal of Management Development (January 1997) cited "the lack of post-merger success as increasingly being attributed to human factors. Mergers increase employee uncertainty, and with that increase there seems to be a rise in stress and a decrease in satisfaction…"

The Human Factor — A Link Between Job Insecurity and Safety

Certainly, most corporations understand the negative effects that employee job insecurity has on worker satisfaction, health and turnover. However, according to a study in the Journal of Occupational Health Psychology (2001, Vol. 6, No. 2, 139-159), "…employers also need to consider the possibility that job insecurity can have potentially dangerous implications for employee safety attitudes and behaviors. Employees who feel that their jobs are insecure may chose to ignore critical safety policies."

The study found a consistent link between job insecurity and safety that has significant implications for corporate M&As. Often, when merger transactions are pending, employees have to juggle competing demands of production, quality and safety while worrying about the stability of their jobs. Furthermore, employees facing uncertainty may perceive that the demands of safety and production are incompatible, decreasing their safety motivation in favor of production. Therefore, it’s not too surprising that the organizational upheaval of a merger creates a prime breeding ground for compromised safety.

Compound the complexity of the merger with a fragile safety situation — including the need to integrate and convert chemical management data and material safety data sheets (MSDS) — and the likelihood of a negative outcome such as a major accident or injury correspondingly increases.

A Corner on Compliance

It is very common for companies to lose momentum during an M&A transition. Compromised safety is the last thing they need to deal with and could throw a devastating curve into the organization’s ability to remain competitive.

Therefore, it becomes more important than ever for executives and their environment, health and safety (EH&S) managers to build into merger strategies a plan for maintaining a safe workplace and integrating safety data. Because just as the M&A trend ticks upward, the Occupational Safety and Health Association (OSHA) has announced that the agency’s enforcement efforts and inspections will continue to increase. And most organizations know that even in the best of circumstances managing OSHA compliance can be tough.

In fact, companies involved in a merger are just as vulnerable to an OSHA inspection as those who are conducting business as usual. In 2000, OSHA and companion state agencies performed 36,350 workplace inspections. During that year federal OSHA inspectors found 80,472 workplace violations and handed out more than $86.5 million in penalties to companies. Of those violations, 52,000 were classified as "serious," costing companies $50.36 million in penalties. Individual states investigated another 54,510 businesses in 2000, fining them an additional $68.6 million. Since a tight rein on finances is paramount during a merger, such a noncompliance hit could quickly derail the transaction.

One of the main ways a company complies with OSHA is by adhering to the Hazard Communication Standard (HCS), also known as the "Right to Know Law." The HCS requires employers to provide chemical information and training about chemical hazards to all employees who may be exposed to hazardous chemicals on the job. Such information is typically provided in the form of MSDS. These sheets list the physical and health hazards of a particular chemical, control measures — such as ventilation requirements — and personal protective equipment required during use. An MSDS also contains vital emergency information, such as first aid measures and spill mitigation procedures.

While some companies still use binders containing hard copies to maintain their MSDS, most forward-thinking organizations have converted to electronic (software or Internet-based) database systems — better positioning themselves to ensure compliance with the law, as well as the highest degree of safety for their employees.

What Merging Companies Can Do

Clearly, during a merger avoiding OSHA noncompliance, keeping employees motivated and safe and developing a safety data integration plan only scratch the surface of the long list of concerns to be addressed. According to IBM Global Services Consulting, "Information technology (IT) initiatives such as data conversion and infrastructure consolidation often hold the key to realizing up to 85 percent of merger goals." Indeed, when it comes to safety data integration during mergers, Dave Moss, Dolphin Software vice president and national account manager has seen it all.

"In the aftermath of a merger, everyone involved in attempting to cobble together a data integration plan bemoans what they now know in hindsight," said Moss. "Lack of a comprehensive plan that includes integration of safety and hazardous chemical data is truly where many mergers get messed up. It makes it that much harder to create an effective, standardized EH&S program for the new organization."

One of the toughest problems that typically haunts EH&S managers, IT managers and merger transitions teams alike is: How are we going to work together to incorporate a divergent set of safety data systems and processes? In short, the task of examining existing systems at all the merging companies’ sites — and then determining which data to preserve and how — can be a logistical nightmare.

For instance, Moss recalls a merger situation where they faced a tight budget and a two-week timeframe to develop and implement the system rollover for the merging companies. He explained, "Ultimately, working around the clock during the transition, we were able to put a bandage on the system. But now, post-merger, the newly-formed company is still faced with the need to develop a standardized solution."

However, Moss adds that companies can take heart. Incorporating a few simple steps into the pre-merger plan will save time and money and help merging companies avoid costly missteps in development of a standardized EH&S/chemical data management system.

1) Make attention to safety a priority. Safety processes should play just as big a role during the merger as they did prior, especially in light of the connection between employee insecurity — inherent in the merger environment — and compromised workplace safety. Likewise, if safety has been a backburner issue, development of the strategic merger plan could be an opportune platform to increase safety’s role in the overall corporate vision.

2) Adopt big picture thinking. Allocate adequate budget for comprehensive examination of all safety processes and data as well as development, implementation and maintenance of the data integration plan. Savvy business leaders understand that capital investment upfront will typically give a greater return-on-investment in the immediate post-merger organization.

3) Seek the services of a safety data consultant firm. One of the most overwhelming parts of a merger can be assigning a transition team to take an objective view of what each company brings to the table. Involving an outside safety data management expert can help. They can make a valuable contribution to the transition team by asking the right questions and pinpointing system strengths and weaknesses. By closely examining the systems in place in all merging firms and at each of their independent sites, the safety data management expert can identify potential data redundancies and recommend a streamlined integration process. Moreover, a full-service consultant firm can conduct much of the data integration work for the merging firms. Reputable companies should make it easy on merging organizations to integrate safety data — for instance, they should be able to accept MSDS that are simply "thrown in a box" and shipped to the consultant firm to be sorted through and organized electronically. In such a scenario, look for a company that:

* Has the logistical and administrative depth to deal with global corporate needs. Determine if they have the capability and experience to configure and serve the entire scope of the merging organization’s national and international sites.

* Has high standards for ensuring the accuracy and legibility of text conversion. They should be able to translate hard-copy MSDS to electronic text and file it in a database. Some companies attempt to cut costs by simply using a scanned image — which shows a 30 percent failure rate when it comes to legibility — instead of the higher quality text conversion which is 100 percent legible.

* Provides comprehensive safety data management services in the post-merger environment. This should include contacting chemical manufacturers on a regular basis to ensure the integrity of your safety information.

Conclusion

While no two merger transactions are exactly the same, the need to attend to safety throughout the process remains constant. Companies like Viendi, Seagrams, Georgia Pacific, Mead and Weyerhaeuser have successfully developed standardized EH&S systems and have avoided merger-weakening accidents and worker injuries by incorporating safety data integration into their overall business strategies. By conducting a critical assessment of existing systems and processes and relying on the services of sophisticated data integration experts, they maximized merger outcomes — energizing and strengthening their new organizations for long-term competitiveness.

About the Author:

Debora Sepich is a co-founder and current vice president of operations of Dolphin Software, a leader in hazardous chemical information management. When Ms. Sepich co-founded the company in 1991, automating hazard communication was in its infancy. Today she manages day-to-day project flow and resources MSDS data services to meet the established corporate goals. Dolphin’s influence on the industry has resulted in chemical management programs across the world in such varied industries as pharmaceuticals, aerospace, engineering, health care, forest products and government. Ms. Sepich received a Bachelor of Arts degree in management and organizational development and is currently working on a postgraduate degree at George Fox University.