Why the right partner makes all the difference
In the world of industrial M&A operations, even a seemingly minor detail can jeopardize an entire deal. A recent case illustrates this clearly: a major European conglomerate was ready to acquire a chemical processing plant in Central Europe. The target company showed strong financial fundamentals, a stable client base, and strategic patents that aligned perfectly with the buyer’s portfolio.
However, during the final stages of due diligence, a critical element emerged—initially considered irrelevant: an obsolete cooling tower.
An underestimated detail, an underrated risk
Cooling towers are common components in industrial facilities, but in this specific case:
- The tower showed advanced internal corrosion and a non-compliant water tank.
- These issues had not been flagged in the initial environmental reports, as they were below standard risk thresholds.
- The local maintenance team considered them “routine.”
But a detailed risk analysis revealed potentially devastating consequences.
The main risks identified
In the final phase of due diligence, technical analysis uncovered several serious issues tied to the cooling tower. The most urgent concerned bacterial contamination from Legionella: internal corrosion and stagnant water created the ideal conditions for bacterial proliferation. Exposure to contaminated aerosol could have caused significant health impacts, even outside the facility.
But it wasn’t just a hygiene issue. The plant failed to meet local environmental standards, leading to a clear case of regulatory non-compliance, with potential fines of up to €50,000 per day. Additionally, there was a high operational risk: an emergency shutdown would have caused delivery delays, contractual penalties, and the potential loss of key agreements.
When risk management affects the value of an M&A deal
After the discovery, the buyers requested a significant price adjustment to cover adaptation costs and potential downtimes. The sellers, unprepared, brought in their technical team—who confirmed the severity of the issues. Negotiations stalled.
Without effective risk management, the entire M&A deal was on the verge of collapse.
Key lessons on risk management in industrial M&A
Even “minor” risks can lead to major consequences—economic, legal, and reputational.
- Technical due diligence is essential: analyzing financial data alone is not enough. Facilities, structures, and environmental compliance must also be evaluated.
- Local regulations matter: what seems insignificant to the central team can be critical in the eyes of local authorities.
- Unplanned shutdowns are expensive: delays, penalties, and customer dissatisfaction can escalate quickly.
The value of an experienced QHSE partner
The turning point? The intervention of a specialized QHSE partner (Quality, Health, Safety, Environment). Their approach allowed the company to:
- Conduct a targeted technical audit, identifying every real risk.
- Quantify adaptation costs and propose actionable solutions to minimize disruptions.
- Deliver a structured risk assessment, essential to renegotiate with transparency.
- Develop a clear implementation plan, outlining timing and accountability.
Thanks to this risk management strategy, the deal was saved and finalized with clearly defined responsibilities.
Conclusion: risk management is not a detail
In industrial M&A transactions, it’s not only the core assets that determine success. Secondary elements—like a neglected tower—can quickly become deal-breakers if not handled competently.
Proper risk management is what transforms a potential failure into a successful acquisition.
If you’re pursuing an M&A deal, choose a QHSE partner who can safeguard your investment—and your future profitability.