Charity Mergers:
The real issues you need to consider
Martyn Davies
Senior Associate, Geldards LLP
Charity Mergers:
• Merger options
• Trustee Considerations
• Practicalities
• Due Diligence
• Documentation to expect
What do we mean by “Merger”?
• Two or more separate organisations coming
together to form one legal entity – usually
- A n...
Which option to choose?
• Depends on legal structures involved
• Bargaining position of the parties involved
• Any specifi...
Which option to choose?
Option 1
• New corporate body established to be recipient
Advantages
• Perception of parties (not ...
Which option to choose?
Option 2
• Existing organisation acts as recipient
Advantages
• No costs of creation of new body (...
Considerations
Initial Questions for Trustees
• Is a merger in the best interests of the charity
• What are the likely ben...
Initial Questions for Trustees
• What are the likely costs to achieve the
merger, consider time commitments of
staff/trust...
• Establish legal status of each party (company,
trust, unincorporated association);
• Check “objects” of each
• Are “acti...
Practicalities
• Check governing documents, is there:
- Power to merge or
- Power to transfer or
- Dissolution clause whic...
Practicalities
• Is Charity Commission involvement required
- Only if insufficient powers in and no power to
amend governi...
Practicalities
• Other consents which may be required:
- Members
- Grant funders (esp. if merger would trigger
repayment)
...
Due Diligence
Overview
• Goes beyond “initial questions”
• Investigations into each charity to achieve
“full knowledge”
• ...
Due Diligence
Scope & Who conducts
•May involve:
- Lawyers
- Accountants
- Other advisors
- In-house
•Timescale:
- Can be ...
Due Diligence
How & Steps
• Party A (or their advisors) request information
from B for themselves (and also Shadow
Board o...
Due Diligence
Key to a smooth process
• Ensure both sides appoint a senior individual or
team to manage the process
• Agre...
Due Diligence
Areas covered:
• Corporate structure - subsidiaries
• Accounts and supporting information
• Material changes...
Due Diligence (continued)
• Assets
• Valuations if necessary
• Commercial agreements
• Intellectual property rights
• Prop...
Due Diligence (continued)
• Staff terms and conditions / disputes
• Pensions
• Details of any material complaints, dispute...
Process
Merger Paperwork – Usual
• Due Diligence Reports
• Board/Trustee minutes and resolutions to
proceed
• Governing do...
Cardiff Derby Nottingham
Thank You
Any Questions?
Contact details
Martyn Davies
DD: 029 2039 1745
E: martyn.davies@geldards.com
Our Merger Journey
Sian Mainwaring
Aim of this workshop
• To outline the approaches and processes we
took
• Our learning experiences and challenges
• Food fo...
Who were we?
• Neath and Lliw Valley Women’s Aid
• Together, 60 years experience supporting
women and children experiencin...
Who are we now?
CALAN Domestic Violence Services
• First Women’s Aid groups in Wales to merge
• Company limited by guarant...
Our merger journey
The first step....
• 2010 remodelled children and young people’s
services across NWA/LVWA
• A vision to integrate services...
Our BRAVE experience
• Increased referrals to the service
• Increased number of children and young people
accessing 1-2-1 ...
Why a merger?
• The development, innovation and sustainability of
appropriate services to individuals and families
• Best ...
Agreed Principles
• A merger of equals
• Positivity and momentum to be
maintained through the process
• New organisation, ...
The merger begins.....
• January 2011 – Neath WA and Lliw Valley WA
made a formal commitment to explore a
merger
• Merger ...
Continued…..
• Due diligence exercise – financial and
organisational perspectives
• Decision taken to formally transfer as...
Continued…..
• Schedule of planned consultation events
agreed by MSG
• Development of corporate identity
• Legal documenta...
Our key elements
• Communication, communication,
communication
• Consultation and engagement
• Pilot programmes and interi...
Communication
• Integral and essential
• Open and meaningful
• Communication plan – who, when and how
• Consultation days,...
Consultation and
engagement
Staff, Service Users and Stakeholders
• SWOT analysis
• Organisational priorities
• RBA Framew...
Interim arrangements and Pilot
Programmes
• To ensure a smooth transition post 1st
July and
minimum disruption to service ...
Our learning
• Organisational identity – name and branding
• External facilitators and experiences
• Integration of staff,...
Challenges.....
• A new experience for Trustees, Staff and
Service Users
• Balancing merger and day to day
responsibilitie...
ANY QUESTIONS?
Charity mergers: the real issues you need to consider
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Charity mergers: the real issues you need to consider

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From the Wales Charity Law and Governance Conference 2014.

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Charity mergers: the real issues you need to consider

  1. 1. Charity Mergers: The real issues you need to consider Martyn Davies Senior Associate, Geldards LLP
  2. 2. Charity Mergers: • Merger options • Trustee Considerations • Practicalities • Due Diligence • Documentation to expect
  3. 3. What do we mean by “Merger”? • Two or more separate organisations coming together to form one legal entity – usually - A new charity formed to take on the assets and liabilities of the original charities or - One of the existing charities takes on the assets and liabilities of the other charity(ies)
  4. 4. Which option to choose? • Depends on legal structures involved • Bargaining position of the parties involved • Any specific issues (legal or otherwise) which need to be accommodated
  5. 5. Which option to choose? Option 1 • New corporate body established to be recipient Advantages • Perception of parties (not a “takeover”) • Clean start, equality of parties Disadvantages • (Possibly) costs of creation of new body • Consents to transfer assets to new organisation
  6. 6. Which option to choose? Option 2 • Existing organisation acts as recipient Advantages • No costs of creation of new body (but may be costs of amendments to recipient governing document, name etc) • Recipient won’t need to transfer its assets Disadvantages • Can be perceived to be “takeover”
  7. 7. Considerations Initial Questions for Trustees • Is a merger in the best interests of the charity • What are the likely benefits/risks • Are the charities compatible in terms of objects, vision, culture and values etc • What are the views of the key funders/beneficiaries of the charity – will they support it
  8. 8. Initial Questions for Trustees • What are the likely costs to achieve the merger, consider time commitments of staff/trustees as well as financial (professional fees/rebranding etc) • Will any consents be required to allow the merger to happen, are these likely to be given Considerations
  9. 9. • Establish legal status of each party (company, trust, unincorporated association); • Check “objects” of each • Are “activities” compatible and in furtherance of objects? • What will transfer, for example are there any permanent endowment /special trusts or large liabilities Considerations
  10. 10. Practicalities • Check governing documents, is there: - Power to merge or - Power to transfer or - Dissolution clause which can be used to facilitate the merger?
  11. 11. Practicalities • Is Charity Commission involvement required - Only if insufficient powers in and no power to amend governing document or - Governing document requires consent
  12. 12. Practicalities • Other consents which may be required: - Members - Grant funders (esp. if merger would trigger repayment) - Landlord(s) - Customers - Sector regulator
  13. 13. Due Diligence Overview • Goes beyond “initial questions” • Investigations into each charity to achieve “full knowledge” • If properly conducted there will be no nasty surprises!
  14. 14. Due Diligence Scope & Who conducts •May involve: - Lawyers - Accountants - Other advisors - In-house •Timescale: - Can be lengthy - Plan in sufficient time so as not to lose momentum and ensure deadlines met - Be clear about who is doing what
  15. 15. Due Diligence How & Steps • Party A (or their advisors) request information from B for themselves (and also Shadow Board of newco) • Party B (or their advisors) request information from A for themselves (and also Shadow Board of newco) • Replies compiled, exchanged and considered
  16. 16. Due Diligence Key to a smooth process • Ensure both sides appoint a senior individual or team to manage the process • Agree timescales for the provision of replies to enquiries and keep to them • Have weekly calls to ensure matters are progressing in line with agreed timetable • Agree confidentiality terms early and a press release in case of a leak
  17. 17. Due Diligence Areas covered: • Corporate structure - subsidiaries • Accounts and supporting information • Material changes since last accounts • Banking and borrowing detail • Grants and terms
  18. 18. Due Diligence (continued) • Assets • Valuations if necessary • Commercial agreements • Intellectual property rights • Property (land, buildings, environmental etc) information
  19. 19. Due Diligence (continued) • Staff terms and conditions / disputes • Pensions • Details of any material complaints, disputes, litigation and claims • Sector specific regulatory compliance
  20. 20. Process Merger Paperwork – Usual • Due Diligence Reports • Board/Trustee minutes and resolutions to proceed • Governing documents of newco • Notice of EGM of members if required • Merger agreement • Asset Transfers • TUPE letters
  21. 21. Cardiff Derby Nottingham Thank You Any Questions?
  22. 22. Contact details Martyn Davies DD: 029 2039 1745 E: martyn.davies@geldards.com
  23. 23. Our Merger Journey Sian Mainwaring
  24. 24. Aim of this workshop • To outline the approaches and processes we took • Our learning experiences and challenges • Food for thought....... • Any questions
  25. 25. Who were we? • Neath and Lliw Valley Women’s Aid • Together, 60 years experience supporting women and children experiencing domestic abuse • Organisational similarities • Operating within 1 Local Authority - Neath Port Talbot
  26. 26. Who are we now? CALAN Domestic Violence Services • First Women’s Aid groups in Wales to merge • Company limited by guarantee and registered charity • Domestic violence services for all individuals and families • Crisis intervention and preventative services • Refuge and Community Support Services • BRAVE team – specialist children and young peoples project • Lead organisation for NPT DA One Stop Shop • Campaigning and awareness raising • Big Lottery EIP project
  27. 27. Our merger journey
  28. 28. The first step.... • 2010 remodelled children and young people’s services across NWA/LVWA • A vision to integrate services, avoid duplication, reduce central costs, increase and diversify service provision, develop specialist skills and reach more children and young people • BRAVE – one specialist service from June 2010 • Dipping our toes in “Collaboration”
  29. 29. Our BRAVE experience • Increased referrals to the service • Increased number of children and young people accessing 1-2-1 and group support • Service diversity and development – RESPECT interpersonal violence programmes, specialist therapeutic play service and prevention and education programmes • Reputation synonymous with excellence and innovation
  30. 30. Why a merger? • The development, innovation and sustainability of appropriate services to individuals and families • Best practice and quality of services • Efficiency savings and rationalisation of resources • Capacity to respond to policy and development opportunities • To reduce perception of overcrowded voluntary sector
  31. 31. Agreed Principles • A merger of equals • Positivity and momentum to be maintained through the process • New organisation, new name, new identity
  32. 32. The merger begins..... • January 2011 – Neath WA and Lliw Valley WA made a formal commitment to explore a merger • Merger Steering Group established and independent Chair appointed • Legal consultants, Geldards LLP, appointed • Business case for merger finalised • Merger principles and deal breakers identified
  33. 33. Continued….. • Due diligence exercise – financial and organisational perspectives • Decision taken to formally transfer assets with effect from 1st July 2012 • Appointment of an independent HR consultant and drafting HR plan • Sub Groups to the MSG established for HR, finance, governance and corporate identity
  34. 34. Continued….. • Schedule of planned consultation events agreed by MSG • Development of corporate identity • Legal documentation completed June 2012 in preparation for formal transfer 1st July 2012
  35. 35. Our key elements • Communication, communication, communication • Consultation and engagement • Pilot programmes and interim plans • Planning and Structure • Realistic timescales • Energy and momentum
  36. 36. Communication • Integral and essential • Open and meaningful • Communication plan – who, when and how • Consultation days, e-briefings, letters, team meetings • Agreed format, content, timings • Even if no news – communication
  37. 37. Consultation and engagement Staff, Service Users and Stakeholders • SWOT analysis • Organisational priorities • RBA Framework • Corporate identity • Service development • Organisational structures
  38. 38. Interim arrangements and Pilot Programmes • To ensure a smooth transition post 1st July and minimum disruption to service provision • Clear areas of responsibility and lines of communication • Interim arrangements for Senior and Operational Managers • Re-location of staff teams and managers • Joint on-call service
  39. 39. Our learning • Organisational identity – name and branding • External facilitators and experiences • Integration of staff, services and organisational cultures • Momentum and energy • Governance and Board development • Resources, capacity and workloads • Financial considerations post merger
  40. 40. Challenges..... • A new experience for Trustees, Staff and Service Users • Balancing merger and day to day responsibilities • Not missing opportunities • Integrating organisational cultures • Overcoming them and us syndrome
  41. 41. ANY QUESTIONS?

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