1. Making the Most of Merger Stephanie Biden Partner, Charity & Social Enterprise Department Carolyn Miller Consultant 15 May 2014

2. Why Merge? Survival: financial/governance Response to commissioning and contracting or funding bodies Meet beneficiaries’ needs better Greater influence Expand range of services History of collaboration

3. Other ways to collaborate Spectrum of choices:  Collaborative working on issues/projects  Sharing knowledge  Joint venture contract or new entity  Shared services  Full merger

4. Together, we will increase our impact The right move at the right time Expertise + reach

5. Supporters Head office teams Local teams Those we support

6. Three Key Stages to Merger 1.Groundwork  Compatibility  Heads of terms/confidentiality agreement 2.Due Diligence  Financial/legal/operational/cultural 3.Completion  Merger agreement  Practicalities (pre and post)

7. Basic Merger Structures: Asset Transfer 1 A A B B

8. Issues with Asset Transfer 1 B assumes liabilities of A Therefore good due diligence vital Simpler/cheaper resulting governance and management structure Feels like a takeover (but it needn’t)

9. Basic Merger Structures: Asset Transfer 2 A A B B C C

10. Issues with Asset Transfer 2 Same issues as Asset Transfer 1, except:  Feels less like a takeover  More expensive

11. Basic Merger Structures: Group 1 B B A A

12. Basic Merger Structures: Group 2 C C B B A A

13. 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?

14. Compatibility Identify values  beneficiaries  objects  values or mission statements  policies Future management and governance Consultation Trust Name/brand/identity

15. Due Diligence: key legal issues Constitutional  Objects  Powers  Members Structural  Corporate/unincorporated

16. Due diligence: staff/pensions TUPE New staff structure? The new CEO? Pensions  Defined benefit pension schemes  Deal breaker?

17. Due Diligence: Contracts/funding arrangements Contract of funding agreement Consent (funding agreements) Assignment v novation (contracts) Risk – value? Third party suppliers

18. Due diligence: Land Freehold/leasehold property  Restrictions on disposition  Charges  Condition Permanent endowment Other special trusts

19. Due diligence: Intellectual property and data Intellectual property (IP)  Brands, publications, databases Data protection  Personal data  Consent

20. Due diligence: other issues Litigation/disputes Insurance Information technology Trading company Investments Tax/VAT

21. Due Diligence: Regulators Charity Commission/OSCR Homes and Communities Agency Pensions Regulator Care Quality Commission Other sector specific

22. Merger Agreement Warranties and indemnities  Purpose? To focus the mind?  Importance of due diligence process Conditions  Regulators – consents/registration  Consents from funders/contractors  Member approval Pre-assignment/novation/consent TUPE Announcements

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

24. Tips for Success Shared vision Strategic and organisational fit Business case Leadership Recognising human factors Good communications Identifying deal breakers Clear plans for merger process and beyond Sensitivity to different organisational cultures See: IVAR – “Thinking about… merger”

26. Stephanie Biden, Partner s.biden@bwbllp.com Tel: 020 7551 7750 @StephanieBiden Carolyn Miller, Consultant Carolyn.millerpersonal@gmail.com Tel: 07780 678 346