Measuring Process Yields Can Impact Your Bottom Line

2-rows-vatsMany chemicals are produced using batch processes.

This basically means that a batch of product is made by adding several ingredients to a reactor, allowing them to mix and react, and then the finished product is taken out of the reactor and put into containers for sale or use.

In an ideal world, you would add a ton of ingredients and output a ton of finished products. Of course we do not live in an ideal world. In most cases the output is less than the sum of the inputs – and there is good reason.

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Corporate Carve Outs Require More Due Diligence

Buying a complete chemical manufacturing business or company has become a fairly straightforward process, but over the last few years, many large companies have been selling off pieces of businesses in what has become known as a “carve-out transaction.”

due-diligence-47708379_sA carve-out transaction can be a bit more tricky. More due diligence is required. Sometimes the business being carved out will have shared assets, service, utilities and even shared management. It could even be just a product line. In many cases separate historic business information is unclear. It is not unusual to find that the carve out is little more than a technical package and a customer list.

These can be great acquisition opportunities, but they often come with a commensurate increase in risk.

Carve out transactions require significantly more due diligence than normal. The acquiring parties often do not have the additional resources or experience needed to do the work required. Chemvalon can provide cost-effective experience to help the acquisition due diligence process and as well as post-acquisition transition help.

If you are considering a carve out acquisition or sale, why not ask Chemvalon to help with pre-sale preparation or pre-acquisition due diligence. Chemvalon has a team of industry specialists capable of adding the extra horsepower your team needs to get the job done. Chemvalon can provide both buy-side and sell-side due diligence.

You Only Get What You Inspect

Chemical companies tend to be capital intensive and usually have good, effective systems to control hazards and risks.

inspector-20660921_sBut still things go wrong. Why?

More often than not it’s the little things, that, left unchecked, snowball into bigger things. Usually it’s human error. In most cases, it turns out that a procedure was not followed and nobody noticed or cared until it was too late.

At Chemvalon, we have a saying, “ You get what you inspect, not what you expect.”

As part of due diligence, we look for checks and balances, and we check for objective evidence of compliance. Sign-off sheets are great – but what does your gut tell you? Does it really look like the task signed off was performed with knowledge and enthusiasm?

Simple housekeeping is a good barometer of the health of a business. All the systems in the world will fail unless someone actually takes the time to inspect and report on what is actually happening. Employee interviews will often reveal that all those systems are just paper over the cracks.

Let Chemvalon inspect your acquisition target to ensure that you really get what you expect. Essential chemical industry due diligence starts with Chemvalon.

The Importance of Safety Guards for Manufacturing Equipment

Every year thousands of workers in the US are injured because equipment safety guards are either missing or incorrectly installed.

high-voltage-warning-34092926_sAs part of your due diligence study, a quick tour of the factory will reveal a lot if you know what to look for.

Rotating equipment such as motors and gearboxes are easy items to check. All too often a maintenance operation is left incomplete because the equipment guard was not reinstalled. The equipment is put back into service, but without the safety guard, the situation is ripe for a serious accident.

Equipment guarding is not usually expensive and in most cases it is an easy fix. Loss of life or limb from unguarded equipment is always serious and can never be fixed.

Don’t buy a business that has pre-existing OSHA violations. As part of your acquisition due diligence, ask Chemvalon to provide an assessment of the state of equipment guarding and the likely cost to remediate the problem.

Chemvalon provides operational due diligence services to Private Equity investors.

Where Does That Drain Go?

drain-42451962_sChemical plants are different from most other businesses. Floor drains in a chemical plant are a major cause for concern. At Chemvalon, a common question we ask is, “Where does that drain go?”

On the face of it, it’s a fairly innocent question. The replies we hear are often a major cause for concern.

Most chemical companies operate subject to various permits which restrict how chemicals are used and stored on site. Many chemicals, and especially waste chemicals awaiting disposal, are required to be stored within a secondary containment area. The correct design and construction of secondary containment is essential. Correct management of those areas is a must.

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Maintenance Or Repair – How To Decide

maintenance-repair-37846418_sWhen buying a used car, it’s always good if you can see a pile of maintenance records. Someone took care of the car and spent money to make sure it was kept in good shape.

Buying a chemical company is just the same, and in any assessment of the condition of a plant, a good place is to start is in the maintenance department.

Chemvalon often reviews budgets and financial statements which show expenditure on repairs and maintenance. But which cost is it? A repair cost, or a maintenance expense?

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Hotwired for Success – Electrical Installations

electrical-wiring-36915673_sDue diligence is all about risk and reward. How far do you go and just when do you stop spending?

The integrity of electrical installations is not always easy to assess, but some basic buy-side due diligence need not be expensive when weighed against the risk.

But remember, electrical installations tend to fail catastrophically and without an obvious warning. That can be REALLY expensive. Older systems that fail can be impossible to fix, sometimes requiring replacement with new installations – rather than a minor like-for-like repair.

So what can you do?

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Call Me Back Later

cellphone-34198353_sModern cell phones are much more than ….well…phones.

Modern cell phones are cameras, TV’s, GPS’s, flashlights, credit cards, search engines, computers, remote controllers. The list is endless. And everyone is now firmly attached to their cell phones.

But cell phones are much more. Cell phones are now a leading cause of traffic accidents. Cell phones also pose significant hazards when used in chemical plants.

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We Are Big On Safety!

safety-37846852_sSo often we are told by companies that “we are big on safety!”

People tell us with great pride that their company regularly pays employee safety bonuses.

It’s a good idea. Accidents are expensive, so rewards for working safely is a good idea – right?

Well actually no – it’s a pretty bad idea.

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What’s On Your Bucket List?

bucket-6433788_sAbout 15 minutes into a recent chemical manufacturing plant tour, I started making a bucket list. Understand though, this was not a list of the things I need to do before I leave this life. No. It was literally a list of actual buckets in the workplace with about 30 employees. There were buckets everywhere! I counted over a hundred!

Maintenance men used buckets to catch drips from disconnected pipes, and operators used buckets to catch drips from sample ports. Small additives were measured into buckets before being added to reactors. Sure enough, when I looked at the accounts – the company was spending $600 a month on plastic buckets.

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