HSE Due Diligence

A company is a complex entity with many individual components. Its value is measured, among other things, by its capitalized earnings value, i.e. the profit it can generate over a defined period of time. Many factors play a role here. In addition to the potential earnings, the open and hidden risks also play an important role.

In the event of a purchase, all opportunities and risks that the previous owner had until then are transferred to the buyer. The aim of the previous owner is usually to achieve a good price. The buyer's goal is usually to be able to start working in the company seamlessly and to realize the calculated profits.

If it is only after the purchase that a risk actually materializes, this not only reduces profits, but can also halt or even stop the entire operation.

For this reason, companies are generally examined very thoroughly before a purchase and all known details are closely scrutinized. The process of thoroughly investigating the company is called due diligence.

The financial part is usually handled by tax consultants or auditors. The last three balance sheets are examined, a business plan for the coming years is drawn up and, in particular, liquid and illiquid assets are scrutinized.

The company's health, safety and environment (HSE for Health Safety Environment), fire protection and technical building equipment must also be examined. This part is examined in the HSE due diligence or technical due diligence.

Who uses technical due diligence - HSE?

Both buyers and sellers have a great interest in a due diligence HSE. The buyer needs it in order to be able to calculate the risks and the possible capitalized earnings value, to determine an appropriate purchase price, but above all to be able to make a well-founded purchase decision. The seller needs it to be able to actually close the deal with his company, to have proof that everything was really in order with the company on the day of sale, but above all to avoid being held liable for hidden defects after the sale.

If, for example, the property on which the company is located is sold along with the company and used oil seeping into the ground at a depth of 2.5 m contaminates the soil, the previous owner need neither have known nor concealed this. For the buyer, however, it may mean an immediate stop to operations, the demolition of the building and the obligation to clean up the affected soil. This can result in years of legal disputes as to who knew, could have known or should have known what and when.

If a technical due diligence HSE before a planned sale reveals that the soil is contaminated and that the company has no value as a result, the company will probably not find a buyer. However, subsequent, time-consuming legal proceedings are no longer necessary and the damage can be rectified immediately before the buyer invests in expensive modernization work. In the area of fire protection and buildings, we check whether the building permit is still valid and whether the technical equipment and fire protection measures still comply with the approved status and whether they are sufficient for future use.

Important checks before a purchase

The important checks in the HSE area include:

• Are all building permits available?
• Have any changes been made since the initial approval that have not yet been approved?
• Does the company fulfill all fire protection requirements?
• Does the company meet all health and safety requirements?
• Can deficiencies, for example in the escape and rescue routes, be easily rectified?
• Are safety officers prescribed and available?
• Are sufficient fire safety assistants installed?
• Are escape routes adequately signposted?
• Are there emergency plans?
• Are emergency and rescue plans up to date?
• When was the last fire drill carried out?
• Are the instructions given to employees properly documented?

You can have these tests carried out by us, Sicherheitsingenieur.NRW.

Technical due diligence - HSE when transferring a company

On the day of entry in the commercial register or otherwise on the day the purchase agreement comes into effect, not only do all transactions, opportunities and risks pass to the buyer, but often also full responsibility for everything as an entrepreneur without any transitional phase.

At that moment, the buyer must be able to rely on the fact that all legal requirements are fully met, that all safety and security measures are in place and functioning smoothly, and that all employees have received up-to-date training.

The due diligence HSE prepares a kind of handover of the company. Gaps are uncovered, deficiencies can be rectified before the purchase and a smooth change of ownership can take place.

Theoretically, it should make no difference whether the regular fire safety inspection takes place two days before or one day after the change of ownership. However, in addition to a change of ownership, other things can also change in the event of a sale. The previous owner is still involved in all processes up to the last day, may know from memory when the fire extinguishers were last checked or whether the previous owner had a car repair shop on the property.

Even if the company has always carried out regular follow-up training for all safety-relevant employees, the head secretary, for example, could retire with the sale. She could have been the last member of staff who knew where the records were kept or where the emergency key for the boiler room was or something similar.

A due diligence HSE therefore offers not only the effect of being able to assess the dangers and risks, but also the opportunity to refresh and coordinate everything and look at it from the perspective of the new owner.

We support you with due diligence - HSE

Who likes to buy a pig in a poke? If you want to take over a small business, buy a warehouse or acquire a large company with a lot of space, the risks are often hidden. It can quickly become difficult for a trusting buyer to objectively assess all the existing encumbrances on a property.

Not every seller is always fully aware of all encumbrances and problems or deviations from the strict requirements of their own company.

Sicherheitsingenieur.NRW supports you competently in the technical due diligence - HSE. The lawyer and engineer Donato Muro, LL.M. Compliance and Corporate Security, advises and supports you in your HSE due diligence process if you or the property to be acquired belongs to one of the following sectors:

•  Architect's offices
•  Construction companies
•  Chemical or petrochemical plants
•  Craft enterprises
•  Engineering firms
•  Recruitment agencies
•  Manufacturing industry
•  and similar

Together we draw up a plan of which inspections are necessary and which are advisable for your desired property.