1. Kate Sayer 16 September 2016 Mergers and collaborations

2. “trustees of a charity have a duty to consider regularly whether the charity could be more effective at achieving its objects by collaborating or merging with other charities” Charity Commission

3. The collaboration continuum Joint working Two or more charities On a project or venture Or sharing resources Joint venture company Working jointly on a project or sharing services Joint committee or info sharing Full merger

4. Model for collaboration - 1 Organisation A Organisation B Organisation C Sub contract or grant Grant or contract? Lead partner

5. Model for collaboration - 2 Joint activities = JANE (Joint Arrangement, Not an Entity) Organisation B Organisation C Service level agreement – what service and how delivered Organisation A Service or activity

6. Model for collaboration - 3 Jointly owned company Organisation A Organisation B Organisation C Joint venture company Joint venture company Employs staff Runs services Holds leases Employs staff Runs services Holds leases Service delivery

7. Model for shared services - 1 Lead partner Organisation A Organisation B Organisation C Fees/rent Lease or buy premises Hire sufficient staff

8. Model for shared services - 2 Outsourcing Organisation B Organisation C Service level agreement – what service and how delivered Organisation A Supplier Fees

9. Model for shared services - 3 Service company Organisation A Organisation B Organisation C Management services company Management services company Employ staff Manage facilities Raise funds Hold head lease or own property Employ staff Manage facilities Raise funds Hold head lease or own property Buy level of service required Other Organisation Sell services

10. Will you get on with your partner(s)? Do you need to undertake due diligence on them before you work together? Will one control and subcontract? Or will you be equal partners? What about conflicts of interest? Who decides who gets what? Accountability to funder vs. control What to think about….

11. More to think about…. Will there be: a fair share of effort and reward for each? measurable benefits? cost savings? any effect on income? added value from collaboration? any downside or other loss?

12. Is it within your charitable objects and powers? Do you need: a contract a grant agreement or a memorandum of understanding? or a separate company to work through? Is there a termination clause in agreement? What happens if your partner is unable to meet their obligations under the collaboration? And more to think about….

13. New or improved services Access to funding Improved services for beneficiaries Cost savings Knowledge, good practice and information sharing Sharing the risk in new and untested projects Capacity to replicate success Stronger, united voice Better co-ordination of organisations' activities Competitive advantage Mutual support between organisations Benefits include:

14. Outcomes do not justify the time and resources invested Loss of flexibility in working practices Complexity in decision- making and loss of autonomy Diverting energy and resources away from core Damage to or dilution of your brand and reputation Damage to organisation and waste of resources if collaboration is unsuccessful Lack of awareness of legal obligations Additional costs/liabilities if partner fails Stakeholder confusion Risks include:

15. Merger options - basic A A B B New charity C New charity C OR A A B B Operations, assets and liabilities transfer

16. Quick merger Gain control of a charity Appoint your trustees to be their trustees as well – de facto control Ask their trustees to resign You can then take your time to decide what you do next

17. Group structures A A B B New holding charity Some trustees

18. Feasibility study Will this help you achieve your charitable objects more effectively? Is there a cultural fit? What are the benefits and risks? Are there legal issues to overcome? What will the costs (time and money) be?

19. Background – key drivers Describe new way of working Benefits – tangible and intangible Costs and compare with status quo One-off costs of change, including staff time High level plan Risks and how they will be managed Exit strategy Develop a business case

20. Purpose of agreement Activities it is to cover Roles and responsibilities of each Costs and assets and how shared Accountability and liabilities Monitoring Communication Name, PR, logos etc Exit strategy Dispute resolution Collaboration agreement

21. To ensure the merger or collaboration is in best interests of the charity’s beneficiaries will not expose the charity’s assets or beneficiaries to undue risk Consider is the merged organisation a safe house for the charity's assets? what risks and liabilities are being taken on? Due diligence

22. Background and governance Management and people IT and accounting systems and management information Financial information Assets and liabilities Other legal issues Post-merger issues Due diligence

23. Background and governance Overview of external environment and competition Organisational structure – governance and management Review of strategic planning document and risk register

24. Details of staff, job titles, pay and length of service Pension contributions and schemes Details of contracts of employment, staff manual and policies Staff relations and trade union representation Details of volunteers and related policies Management and people

25. Information systems Analysis of age and suitability of IT systems – finance and donor or other records Overview of internal controls and financial procedures Management letters from auditors and management response

26. Financial information Statutory and management accounts, budgets, cashflow Funders: grants, contracts Fundraising activities and rate of return VAT and other tax compliance issues Restricted and unrestricted funds Reserves policy and position

27. Premises – owned and leased details of tenure, usage, rents, dilapidations, tenants and terms etc Investments Debtors and creditors Pension liabilities, deficits, guarantees Contingent liabilities Bank facilities Assets and liabilities

28. Power to merge TUPE and contracts of employment Pension schemes Properties, leases and dilapidations Intellectual property Other legal contracts Insurance Permanent endowments Other legal issues

29. Pro-forma post-merger statement of financial activities and balance sheet Financial projections going forward Accounting for the merger Consents from regulators, funder etc VAT IT systems And more! Post-merger issues