By Paul Hopton BEng CEng (Hons) MIET – Principal Electrical Consultant Director
What happens when Companies are taken over or merge?
Growth often lies at the heart of Mergers and Acquisitions (M&A). Expanding a business organically is still the main method used to grow but acquiring another a business can accelerate growth. This could be because the target offers a product or service that would enhance the acquirer’s portfolio or operates in geographical locations that the acquirer wants to break into. M&A is not all about expanding, it can be about surviving. When an industry hits a rough patch, companies often look to merge with a peer to benefit from economies of scale, taking out the competition through cost and revenue synergies. This is a theme for mature sectors that are seeing limited growth and stagnant profitability. Emerging industries that see large numbers of smaller players in the market, tend to merge to form larger businesses.
What happens to Electrical Safety when Companies are taken over or merge?
In a perfect world, there would be a comprehensive change management process that would pick up any changes that were required. Someone would be assigned to implement each change, a register would be kept, the right people would review and approve the changes, and someone would be responsible for ensuring the necessary changes are implemented correctly.
In the real world what happens is that there is a good chance the new, larger business after the merger will end up with gaps in their management systems and organogram.
What sort of Management System Gaps are we talking about?
Let us look at the situation before and after the M&A. If both businesses are well run and have had a reasonable period of stability, they are both likely to have the following pieces of their Electrical Safety Management System (ESMS) in place:
- Electrical Safety Rules
- Electrical Competency Management System including an Authorisation System
- Project Management System
- Engineering Standards: Design, Installation, Commissioning and Maintenance
- Operational Procedures or Instructions covering anything from excavations to tools and test equipment
- Clearly defined roles and responsibilities for personnel that have responsibilities and accountabilities within the Electrical Safety Management System (ESMS)
What happens after the merger? In the absence of the perfect world scenario, the ESMS can become leakier than a sieve that’s been attacked by a monkey with a pneumatic drill. In the best case scenario you start to see some near misses, the worst-case scenario, someone gets killed or badly injured.
What sort of Gaps start appearing and why?
The first problem you might have is that the merged company could have two ESMS’s. Depending on the size of the business you might end up with different Safety Requirements at different sites because they are operating under different rules. It’s a bit tricky to defend this state of affairs with the Regulator if something goes wrong.
HSE Inspector: “Why have you got different safety standards across your UK operations?”
Site Electrical Engineer: “Beats me Chief” “We are working diligently to rectify that Sir”
HSE Inspector: “Enforcement-tastic. Assistant, pass me my Taser”
Another issue that we see quite regularly is that M&A activity is often justified by reduced operating costs due to “Synergies” between the merged businesses. For “Synergies” read cost cutting and therefore reduced headcount. I have very rarely seen a business that uses the Management of Change procedures correctly when it comes to reducing headcount. What should happen is that the roles and responsibilities for the positions that are being removed or amended should be assessed. Responsibilities that are no longer required can be removed and responsibilities that need to be re-assigned should be added to another Role’s job description.
Does this happen? Not very often.
What does this mean? Responsibilities that are required for the correct operation of the Electrical Safety Management System (ESMS) fall through the cracks. At best, some poor soul picks them up and ends up being overloaded or dropping other tasks that they do not have time to complete. At worst, no one picks them up and holes start to appear in your ESMS.
The consequence of a holey PSMS? Incidents/accidents and failure to comply with legislation. I will not go into other potential consequences of the “Synergies”, but knowledge, skills and experience are lost to the business.
What are you going to do?
- It depends on where you sit in the pecking order of things. Wherever you sit in the organisation, you should be able to identify the Electrical Duty Holder. Contact that person and find out whether they are aware that there are potential gaps or inconsistencies in your ESMS. Give them some examples and ask them if they have a plan to put your Company’s house in order. At the end of the day the Electrical Duty Holder has overall responsibility for Electrical Safety, so they should be concerned if there is potential for things to go badly wrong. They could end up in front of a Judge trying to defend their actions or lack of action, potentially resulting in the unmissable effects of poo being thrown into an electric fan.
- If you are the Electrical Duty Holder, find out where your gaps are and put a plan in place to close them out.
- If you have problems on the Roles and Responsibilities side, you’ll need to identify which responsibilities are not currently assigned to anyone or what amendments need to be made to existing roles and responsibilities. You may need to involve Human Resources, Management, Key Stakeholders, your Peer Group and others in collaborating to resolve the issues.
Need assistance identifying the Gaps in your Electrical Safety Management System?
Feel free to contact us to find out more.