Presentation by Richard Davies, Development Officer LCVS

1. Nov-14©LCVS 1
Better together?
Richard Davies

2. Whilst every effort has been
made to ensure accuracy,
Liverpool Charity and Voluntary
Services accept no liability for
any loss suffered as a result of
following any advice contained
Nov-14©LCVS 2
in this document.

3. Why is the
sector looking at
collaboration?
• Survival: financial/governance
• Response to commissioning and
contracting or funding bodies
• Meet beneficiaries’ needs better
• Greater influence
• Expand range of services
• History of collaboration
Nov-14©LCVS 3

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Defining
collaboration
‘Any situation in which people are
working across organisational
boundaries towards some positive end’
Huxman and Vangen 2005
‘Working jointly to meet agreed
outcomes and adding value that would
not be achieved independently’

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Benefits of
collaboration
1. Sharing of skills, knowledge, resources
2. Reducing delivery overheads
3. Sharing best practice
4. Sharing of risk
5. Developing new or improved services
6. Encouraging innovation
7. Increasing organisational capacity
8. Improving competitiveness
9. Strengthening market position
10. Promoting greater choice in services
11. Improving provision for service users
12. Enhancing organisational profile
13. Enhancing customer service
14. Creating long-lasting, fruitful partnerships
15. Sharing expertise and learning across the sector
16. Promoting sustainability

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Challenges to
collaboration
1. Time
2. Legalities (need to check if can work in partnership), Legal fees
3. May be driven by funders and not be providers themselves
4. No clarity on driver(s) for collaboration
5. Risks e.g. damage to reputation if it goes wrong
6. Getting buy in – from boards, staff, funders
7. Will it really deliver the desired outcome?
8. Organisational culture
9. Reduced independence and autonomy
10. Loss of identity
11. Performance management
12. Finding the right partner/organisation to collaborate with!
13. Data protection

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Challenges to
collaboration…?

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Some different forms of
collaboration
Joint service delivery
• Lead body
INFORMAL FORMAL
Mergers
• Setting up new
organisation (both entities
dissolve into it)
or
• One organisation joins the
other
‘Encounters’
• Networks / networking
• Forums
Joint service delivery
• Consortium
Joint service delivery
• Partnership agreement
Sharing back
office services
‘Encounters’
• Loose partnerships

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Formal and
informal
1.Informal
e.g. networks, forums, loose
partnerships
‘encounters’
Sharing of intelligence
No formal/legal agreement in place

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2. Formal
• A. Joint service delivery – lead body
• One organisation leads on the contract, and delivers it in
partnership with others
• B. Joint service delivery - Consortium
• Separate organisations work together to achieve a common
aim, usually a piece of work or contract.
• A new legal organisation may be set up; but individual
organisations maintain their own identity and core business
and are ‘members’ or partners.
• Formal agreement in place with clear roles on who is the lead
body (organisation who bids for the work), and delivery
agents

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C. Sharing Functions
• where similar organisations link up to share:
• Processes e.g. HR, finances
• Resources e.g. office space
• Services e.g. expansion into new geographical
area
Formal agreement/contract in place
Also known as clustering

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Partnership
agreements
1. Name Vision and specific aims or objectives
2. Allocated duties (delivery of different elements etc.)
3. Admin (record keeping etc.)
4. Membership
5. Conduct of Business – e.g. meetings/quorum
6. Decision-making processes
7. Funding/investment
8. Dispute resolution
9. Performance management
10. Management and administration of the partnership
11. Stakeholder engagement
12. Communications
13. Intellectual property
14. Amendments

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D. Merger
Takes different forms….
One or more organisations close and dissolve
into an existing / another one
• Not always the right choice, but one that
involves the most detailed consideration

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3 key stages to
merger
1. Groundwork
 Compatibility (beneficiaries/objects/values/policies)
 Heads of terms/confidentiality agreement
 Consultation
 Future management structures
2. Due Diligence
 Financial/legal/operational/cultural
3. Completion
 Merger agreement
 Practicalities (pre and post) e.g. assets/staff etc

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Basic Merger Structures:
Asset Transfer 1
A B

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Asset transfer 1
• B assumes assets/liabilities of A
• A closes down
• Therefore good due diligence vital
• Simpler/cheaper resulting
governance and management
structure
• Feels like a takeover (but it needn’t)

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Basic Merger Structures:
Asset Transfer 2
A
B
C

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Asset transfer 2
• New vehicle set up
• Assets/liabilities of both A/B transfer to
new vehicle
• Both A/B dissolve
• Same issues as Asset Transfer 1, except:
Feels less like a takeover
More expensive

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Basic Merger Structures:
Group 1
B
A

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Group 1
• A parent organisation governs a group of subsidiary organisation
• Both retain their own legal identities
• Organisation A becomes a holding company for Organisation B
• Changes made to A to accommodate some new trustees, staff,
assets or projects from B
• Can be used to maintain the services Organisation B
• Organisation A protected from any risks arising from
Organisation B by creating a 'firewall'
• Organisation B continues to operate as a separate legal body,
albeit one controlled by the trustees of Organisation A
• The relationship may continue indefinitely or may be an interim
stage prior to full merger

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Issues with Groups
• Tighter than mere contract arrangements
• Cheaper to establish
• No transfer of liability
• More complex governance and management
• Easier to persuade boards?
• Useful stepping stone?
• Reversible
• Does it solve financial problems?

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Due diligence
• Constitutional
Objects
Powers
Members
• Structural
 Corporate/unincorporated

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Due diligence: staff
• TUPE
• New staff structure?
• The new CEO?
• Pensions
 Defined benefit pension schemes
 Deal breaker?

24. Due diligence:
contracts/funding
• Contract of funding agreement
• Consent (funding agreements)
• Assignment v novation (contracts)
• Risk – value?
• Third party suppliers
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Due diligence: land
• Freehold/leasehold property
Restrictions on disposition
Charges
Condition
• Permanent endowment
• Other special trusts

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Due diligence: other
issues
• Intellectual property e.g. brands
• Data protection e.g. consent to transfer
• Litigation/disputes
• Insurance
• Information technology
• Trading company
• Investments
• Tax/VAT

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Merger
agreements
• Warranties and indemnities
 Purpose
 Importance of due diligence process
• Conditions
 Regulators – consents/registration
 Consents from funders/contractors
 Member approval
• Pre-assignment/novation/consent
• TUPE
• Announcements

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Post merger
• Notifications
 Banks
 Contractors
 Regulators
 Register of charity mergers?
• Final accounts
• Winding up/striking off (NB
Legacies)

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Tips for
collaboration
• Agree a shared vision
• Strategic and organisational fit
• Must be a business case
• Leadership
• Recognising human factors
• Good communications e.g. consult staff and service users
• Identifying deal breakers
• Clear plans for process and beyond
• Establishment of clear partnership / collaboration
arrangements
• Sensitivity to different organisational cultures

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Key message
• There are many ways to collaborate
• Formal or informal
• Merger is not always the answer
• Start a dialogue early
• Give yourself time
• Don’t be afraid to end negotiations

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Further advice
• (0151) 227 5177
• 151 Dale Street
• L2 2AH
• info@lcvs.org.uk
Merseyside Business Support Project