2. Carne | Reidy | Herd
Making Your Business Better
• “Quality is never an accident; it is
always the result of high intention,
sincere effort, intelligent direction and
skilful execution.” --William A. Foster
3. Carne | Reidy | Herd
Agenda
• Not for profit focus
• Issues that I see driving change
• Options for working with other organisations
• What makes an effective arrangement
• Mergers & Amalgamations
4. Carne | Reidy | Herd
The Drivers
• Legal Drivers
– Increasing regulation
– Penalties attaching to Directors & Senior
Executives as well as corporate entities
– Increasing potential for Directors to have
personal liability
– Centro Case – Directors are expected to have at
least a basic level of financial literacy & cannot
just rely on external experts
– McCracken’s Case – Director ordered to pay
damages to creditors
5. Carne | Reidy | Herd
The Drivers
• Non – Legal Drivers
• Government funding agencies driving
productivity increases
• Ageing board members & shrinking
communities
• Competing demands being made on
individuals with the capacity/ability to join a
board
6. Carne | Reidy | Herd
Building a Better Business
• Bigger does not always equal Better
– The way to maximise your potential may in
fact be to leverage what you already have
• Collaborative arrangements
– Client referrals
– Resource sharing
– Co-location
• Memorandum of Understanding
7. Carne | Reidy | Herd
Building a Better Business
• Brokerage
• Joint Projects
• Disposal of non-performing assets &/or
services & focus on the core strengths of
your service delivery
• Merger or Amalgamation – requires
seminal decisions on future viability &
identity
8. Carne | Reidy | Herd
Potential Partners
• Range of partners depending on skill or
service needs
– Residential Aged Care Facilities
– Other Community Care Providers
– Allied Health Services
– CALD & ATSI service providers
– Disability sector
– Service organisation & Regional councils
• For profit or not for profit.
9. Carne | Reidy | Herd
Big Brother
• Funding provider & Funding Agreements
In developing relationships keep in mind:
– Availability of funds
– Services the organisation has agreed to provide
or is funded to provide
– Any restrictions on who the organisation can
contract with
– Approvals required & how long they take to
secure
– Terms which must be included in contracts
10. Carne | Reidy | Herd
Formalising Arrangements
• Verbal – you can just talk about what you
want to do.
• Some writing – minutes of meetings,
exchange letters.
• Formal contract – clearly sets out what has
been agreed
• Aim should be to minimise the scope for
misunderstanding about the responsibilities
11. Carne | Reidy | Herd
Why the Formality?
• Facilitate reporting under Funding Agreement
– Incorporate an agreed framework for recording
activities, clients & costs
• Create transparency in relation to expenditure
– Clear audit trail of where & how money is spent
• Mechanism for ensuring each partner keeps their side of
the deal
– Ensures performance by clearly defining roles &
responsibilities
– Enables any failure to deliver to be easily identified
12. Carne | Reidy | Herd
Why the Formality?
• It is a mechanism for ensuring the
organisation’s obligations to others are met
– Individual clients;
– The community;
– Staff;
• Means of exiting the arrangement
13. Carne | Reidy | Herd
Mergers & Amalgamations
• What are they?
• Combining of two entities into one through
acquisition or pooling of resources
• Involves a change in legal structure for at
least one of the entities
• It is the substance of what occurs that is
important, not the name you give to it
14. Carne | Reidy | Herd
The Process
• Identification of appropriate merger
partner
• Memorandum of Understanding
• Confidentiality Agreement
• Due Diligence
• Merger Agreement
• Securing all necessary approvals
• Completion
15. Carne | Reidy | Herd
MOU
• MOU or Heads of Agreement
– Generally not legally binding but some
parts of it may be e.g. cost sharing
– Outline what is agreed
– Commitment to work toward a binding
agreement
– Undertaking to not consider any other
partner while negotiations underway
– Participate in due diligence
16. Carne | Reidy | Herd
Confidentiality
• Confidentiality agreement
– Must be legally binding
– Protection of commercially sensitive
information
– Protection of personal information
– Usually requires the parties to keep the
fact that they are negotiating confidential
– Agreed protocols for any public
announcements
17. Carne | Reidy | Herd
Due Diligence
• The extent of due diligence
investigations can vary depending on
the nature of the organisations & any
shared history:
– Legal
– Financial
– HR
– Buildings/Infrastructure
– Clinical
18. Carne | Reidy | Herd
Legal Due Diligence
• Corporate structure - constitution
• Board minutes
• ATO endorsements
• Regulatory compliance
• Ownership of assets
• Leases
• Agreements – funding bodies, service
providers, clients
• Employment
19. Carne | Reidy | Herd
Merger Agreement
• Content will depend on how the
transaction is structured
• Also dependent on issues identified in
the due diligence
• Will cover agreement as to:
– Transfer of assets & liabilities
– New corporate structure
– Transfer of client agreements &
employees
20. Carne | Reidy | Herd
What to Avoid
• Demerger – mergers fail because of
poor planning, poor execution &
incompatability
– Poorly drafted MOU
– Did not sign MOU & Confidentiality
Agreement
– No legal due diligence
– No merger agreement
– Joint CEOs
21. Carne | Reidy | Herd
What to Avoid
• Result of a Demerger
– Significant financial cost
– Risk of damage to reputation
– Potential impact on future tenders
– Opportunity cost
– Physically & emotionally exhausting for the
Board & senior staff members
22. Carne | Reidy | Herd
What creates success?
• Communication
• Co-operation
• Facilitation
• Information & Advice
• Documentation
23. The End
Joanne O’Brien
Carne Reidy Herd Lawyers
Level 10, 193 North Quay
Brisbane Qld 4000
P: 07 3236 2900
E:jobrien@crhlaw.com.au
