web: www.locality.org.uk email: info@locality.org.uk tel: 0845 458

8336

Emerging from a MergerLessons learned from the merger of

bassac and DTA

Tina WindersDirector of Finance and Corporate Services

Locality

• History of partnership working• Community Alliance • Membership• Corsham Street - joint staff

The case for merger

• Exit strategy for end of a programme• Manchester Settlement meeting• Trustee engagement• Financial• Need - on either side?

The catalyst

• Staff relationships • Chief Executives• Finance/operations directors• Funders• Strategic Partners

Trust

• Merger v take over• Sensitivities• Larger = more generous• Culture – acknowledge differences, what will

new organisation be like.• Perceived differences greater than actual

Perceptions

• Lawyers (BWB)• Independent consultants (IVAR)• HR – in house/ Croner• PR and branding (Public Life)

Professional Help

• Costs– Legal fees

– Pension liability

– Redundancy costs

– Rebranding, launch

– Due diligence accountants fees

– Governance, additional meetings etc

– Cancelling supplier contracts

• Benefits– Synergy of 2 member

networks

– Savings in SMT, support staff

– Reduced costs of audit, insurance, annual member conference, regional networks

– Opportunity to refresh, marketing etc

– Taken more seriously, more able to sit at the “top table”

Costs v benefits

• Time – too quick v too slow• Consultation union/staff forum• Various types of communication• Joint team days, social events• Listen• Be prepared to change plan

Process

• DTA-bassac/ bassac-DTA• Suggestions ranged from

“bastads” to “community matters”!• Shortlist of 6• (Nearly!) Unanimous support for

locality

What’s in a name?

• Director of integration• Lots of form filling and new signatures needed!• Need to things get in the right order• Launch – venue, publicity

Next steps

locality.org.uk

Part 2

Structures and Legal Considerations

Philip KirkpatrickCo-Head

Charities and Social Enterprise DepartmentBates Wells & Braithwaite London LLP

Spectrum of collaborative arrangements

Sharing knowledge Collaborative working on issues/projects Joint venture by contract Joint venture through new entity Shared purchasing Shared services Merger

Main Collaborative Structures

Un-documented joint working Memorandum of understanding Written contract (JANE) Partnership agreement Limited liability partnership Limited company Group structure Federation

Collaboration Checklist

Compatible objects? Objectives of collaboration How long will it last? Who contributes what? When and how? Effect on staff? Who employs / seconds? Who disciplines?

Collaboration Checklist

Management and governance processes Who decides what? How? Steering committee? Role of the boards Communications – internal and external Policies Budget and budgetary control Accounting arrangements

Collaboration Checklist

Admission of new partners / members Profit distribution Tax and VAT IP and data ownership / management Liability:

contract tort

Insurance Dispute resolution

Collaboration Checklist

Conflicts of interest Data protection Joint ownership problems:

land/premises intellectual property other assets

Methods/timing of termination Consequences of termination

Basic Merger Structures: Asset Transfer 1

A B

Issues on 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)

Basic Structures: Asset Transfer 2

A

B

C

Issues on Asset Transfer 2

As with Asset Transfer 1 except: feels less like a takeover

more expensive

If you had to pay the costs personally, how would you do it?

Basic structures: Group 1

B

A

Basic Structures: Group 2

C

A B

Issues with Groups

Tighter than mere contract arrangements Cheaper to establish No transfer of liability More complex/expensive governance More complex/expensive management Easier to persuade boards? Useful stepping stone?

Basic Structures: Federation

F

M

M

M

MM

M

Issues with Federations

Collaborative rather than merger structure No transfer of liability Role is to co-ordinate/support independent

activity One member can damage reputation of all Need clear, binding rules of

conduct/membership Need proper control of IP Federation needs to add value

Legal Due Diligence

Objects and powers Members Structure – corporate / unincorporated? Regulatory support / approval? Contracts / grants Debts Employees and TUPE Pensions Litigation / disputes

Legal Due Diligence

Properties freeholds / leaseholds restrictions on disposition (s 36 CA 1993) charges condition

Permanent endowment / specie land Other special trusts

Legal Due Diligence

Hire purchase / leased assets Intellectual property Information technology Investments Tax / VAT Trading company Data protection Insurance Other sector specific issues

Merger Agreement

What transferring? Warranties and indemnities – where does

risk lie? ongoing contractual liabilities known creditors unknown creditors liabilities arising from breach of trust liabilities arising from excusable breaches

of trust run-off insurance?

Merger Agreement

Conditions consents from / registration with regulators consents from funders / contractors member approval

Pre-assignment / novation / consent contract / lease arrangements

TUPE Announcements

Philip KirkpatrickPartnerCo-Head of Charity and Social Enterprise

Bates Wells & Braithwaite London LLP

p.kirkpatrick@bwbllp.com

DD: 020 7551 7835www.bwbllp.com