(82b) Getting the Deal Done - While Managing Process Safety Risk

Historically, chemical complexes often originated from a single company that built – and continued to - expand their operations, developing a large site with significant infrastructure and diverse operating units. However, as corporate objectives change, companies may look toward alternative business models such as mergers, acquisitions, leases, and licensing agreements as a means to grow, integrate supply chains, generate cash for other investments, and achieve a competitive advantage. Examples of recent Merger and Acquisition (M&A) activity include the merger of Lyondell and Basell, the acquisition of Rohm and Haas Company and Ciba Specialty Chemicals, the spinoffs from DowDuPont, and the acquisition of Wengfu Co. Ltd. By Shanghai Zhongyida Co. Ltd. for $US6.6 billion. Collectively, in 2021, there was 1,251 deals completed globally within the chemical industry that was worth $US105 billion¹.

These large deals often result in a shift from the single owner/operator structure toward a greater diversity in ownership, operating, and service provider models. Industrial parks and joint ventures are common, and alternative operating models continue to be developed – land is leased to other companies, operating units are sold or may be operated by other entities, and utilities and other services may be provided by third parties. These new modes of operation can create substantial value; however, if not properly managed, they can also increase risk.

Assessing these potential deals to anticipate and manage process safety risk can be quite challenging. The prospective deals are often confidential, limiting the number of people who can be involved in the assessment. The scope is sometimes fluid, and time is usually limited to complete the process safety evaluation. If there are significant risks related to the deal that cannot be mitigated, concerns need to be elevated to upper management so they can be addressed before the deal is signed. Key provisions may also need to be added to contract language to clarify expectations between parties and ensure continued safe operation.

This paper discusses some of the challenges in assessing potential M&A deals from a process safety lens and describes a work process for engaging with the M&A team, conducting preliminary screening and more detailed assessments, communicating the results, and incorporating key agreements into contract language.