The Skylark Merger Framework 1 Charity Support Network Skylark The Skylark Merger Framework A four stage approach to mergers within the charity sector Guided by the Business Strategy determine a short-list of target merger candidates. Merger StrategyFeasibility Integration Planning Integration/ Execution Exploring the potential benefits and risks of merging. What opportunity would the merger deliver both parties? Are the charities’ cultures compatible? Detailed Integration planning: How will the charities come together? How will the transition be handled? Formal due diligence. Implement the agreed plan, review and measure associated short and long term benefits. Transition NewCharity to be fully up and running as ‘business- as-usual’. Joint agreement to pursue Agreement in principle of ‘Can’ they will come together GO/ NO-GO joint decision NewCharity fully up and running IIIIIIIV END OF STAGE MILESTONES Introduction A clear and agreed process, with outcomes and decision points defined at the end of each stage, provides an invaluable “route map” to help Boards of Trustees, Chairs, CEOs and senior staff navigate their way through a merger effectively and efficiently. The four main phases of The Skylark Merger Framework provide the key generic steps which can then be tailored to the specific circumstances of your merger. Stage

The Skylark Merger Framework 2 Charity Support Network Skylark Topic areasPossible Outcomes Vision & Benefits Service Continuity Leadership, Governance and working arrangements Operations Legal & Financial Due-diligence, Options and Risks Agreement on a draft Memorandum of Understanding (MOU) and a decision in principle to pursue a merger; move to Stage III: Integration Planning OR Some form of collaboration OR End of discussions Merger Strategy Feasibility Integration Planning Integration/ Execution IIIIIIIV This stage aims to assess the advantages and feasibility of the merger providing the CEOs and Boards of Trustees enough detail to secure to a “decision in principle” to merge. The opportunity and any major issues are determined by answering questions within five topic areas. The Skylark Merger Framework Stage II: Feasibility Stage Exploring the potential benefits and risks of merging. Testing for major issues, such as: Are the charities’ cultures compatible? What opportunity would the merger deliver both parties? Is the proposed merger feasible?

The Skylark Merger Framework 3 Charity Support Network Skylark Merger Strategy Feasibility Integration Planning Integration/ Execution IIIIIIIV The Skylark Merger Framework Stage II: Feasibility- Vision & Benefits Vision & Benefits Questions to Consider 1.Is there agreement about vision, values and aims for the merged organisation? 2.What potential benefits does it offer to the charities’ beneficiaries? 3.What are the major risks to both organisations of achieving a successful merger? 4.Is there a good “cultural fit” between the two charities? 5.Are Trustees really up for it, given the work commitment and possibly no future role for them personally? 6.How is the issue of two Chairs and CEOs going to be resolved? 7.What form of merger is likely to be appropriate? Are identities going to be merged or protected? Possible consortia model 8.What is the likely timeline bearing in mind constitutional constraints? 9.Do both boards have the will and stamina to see it through? Topic area: Stage Tips – including supporting tools Mutual sense of a “good cultural fit” is critical at the outset Having a clear benefits statement helps maintain focus Outputs 1.Joint Trustees’ meeting 2.Outline vision statement for merged charities 3.Develop outline timetable & milestones

The Skylark Merger Framework 4 Charity Support Network Skylark Merger Strategy Feasibility Integration Planning Integration/ Execution IIIIIIIV The Skylark Merger Framework Stage II: Feasibility – Service Continuity Service Continuity Questions to Consider 1.Is there enough capacity to provide service continuity during the merger? 2.How will the existing services of both organisations continue to be delivered to their beneficiaries during the merger process? 3.Do both charities have sufficient staff resources to both deliver services and investigate the merger opportunity? 4.Will the merger alter funding arrangements for existing services in any way? 5.What corporate communication will both charities put out to their stakeholders during the feasibility stage? 6.How will you refer to the proposed merger in any funding bids that are submitted during the feasibility stage? Topic area: Stage Tips – including supporting tools Do not under-estimate the amount of Trustee, management & staff time involved in merger Outputs 1.Agreement on any joint and separate working during merger process, inc. funding bids 2.External and internal communication of progress of merger

The Skylark Merger Framework 5 Charity Support Network Skylark Merger Strategy Feasibility Integration Planning Integration/ Execution IIIIIIIV The Skylark Merger Framework Stage II: Feasibility – Leadership, Governance and working arrangements Leadership, Governance and interim working arrangements Questions to Consider 1.How can the spirit of collaboration best be reflected in the working arrangements for exploring merger: Joint steering committee of Trustees? Joint management group or project board of CEOs, senior leaders? 2.Who will lead the merger process? 3.What should the governance arrangements be during and after the merger? 4.What are the interim funding arrangements? 5.What should the decision making process be? Boards, members… 6.How will the CEO be appointed? 7.At what point should internal and external communications begin? 8.What membership arrangements (if any) would there be? 9.How and when will staff, funders and other stakeholders be informed and consulted? 10.Will charitable objects of either or both organisation need to change? Topic area: Stage Tips – including supporting tools Address leadership questions early Clearly defined governance through interim period is critical Outputs 1.Exchange summary Information Sheets 2.Signed Confidentiality Agreement 3.Draft Memorandum of Understanding (MoU)

The Skylark Merger Framework 6 Charity Support Network Skylark Merger Strategy Feasibility Integration Planning Integration/ Execution IIIIIIIV The Skylark Merger Framework Stage II: Feasibility - Operations Operations Questions to Consider 1.What portfolio of services would the merged charity offer? What is the operational model through which these new services will be delivered? 2.What it the key property and accommodation issues to be decided? What accommodation will the merged charities need? Can it be provided within their existing estate or will new arrangements need to be made? 3.What are technological requirements needed to support it? How capable is the existing ITC infrastructure of supporting the new model? 4.What are the headline cost items in delivering a common technology platform? Are the existing client databases, finance and HR systems compatible? Which, if either, would be the preferred choice for a single consolidated technology platform? 5.Are there any opportunities for combining backoffice functions within a single entity? (Fundraising, HR, Finance, Communications, ICT, Policy & Research. Topic area: Stage Tips – including supporting tools Focus on the operating requirements of new charity, rather than technology Outputs 1.Develop a proposed operating model for the combined charity 2.Inventory of property and ICT assets 3.Develop outline merger budget

The Skylark Merger Framework 7 Charity Support Network Skylark Merger Strategy Feasibility Integration Planning Integration/ Execution IIIIIIIV The Skylark Merger Framework Stage II: Feasibility – Legal & Financial Due-Diligence, Options and risks Legal & Financial Due-diligence, Options and Risks Questions to Consider 1.What types of professional advice are going to be needed and how are they best provided? Legal Pension Identify any potential “show stoppers” at outset HR 2.How should the due diligence process be undertaken, in order to minimise risk to the merged organisations? 3.Are there any constitutional and other legal issues to deal with? 4.What are the implications of the merger on pension arrangements in general and for defined benefit schemes in particular? 5.Are there any property issues to deal with? Eg leases that prohibit sub-letting 6.What is the outline three year business plan outline for the NewCo? 7.What are the main risks in realising the plan? Topic area: Stage Tips – including supporting tools Identify any potential “show stoppers” at outset eg. Pension liabilities, property obligations Outputs 1.Outline 3year business plan 2.Approach potential legal & financial due diligence providers 3.Decide on the use of an independent facilitation

The Skylark Merger Framework 8 Charity Support Network Skylark Integration WorkstreamsOutputs Leadership, Governance, Organisation, People & Culture Service & Beneficiaries Financial Legal Communications & Branding Facilities, IT & Systems Project management & Service Continuity  Detailed project plan and status updates  Completed MOU  Financial and legal Due Diligence reports  Business Plan covering all organisational/operational areas with financial implications  Agreed Legal Model and steps to achieve Merger StrategyFeasibility Integration Planning Integration/ Execution IIIIIIIV Detailed Integration planning: How will the charities come together? How will the transition be handled? This stages undertakes legal and financial due diligence, confirms interim leadership positions and governance, builds a NewCo business plan and develops a detailed implementation plan with costs and resources The Skylark Merger Framework Stage III: Integration Planning Stage