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As the charity sector continues to manage the impact of the pandemic, many charities are facing financial uncertainty. In this context many senior leaders, to ensure their charity’s sustainability, will be considering collaboration and merger. In this webinar, in association with Bates Wells, we aim to answer questions such as: When should a charity in crisis consider merging? What are the alternatives? How can you make the best decision for your organisation? You will also hear about a new online decision-making tool which will help organisations chart the options open to them in a tight financial spot.
Decision making in a crisis: Collaboration and merger
DECISION-MAKING IN A CRISIS:
COLLABORATION AND MERGER
20 AUGUST 2020
WELCOME AND INTRODUCTIONS
• Josie Hinton, Capacity building programmes manager, NCVO
• Philip Kirkpatrick, Partner, Head of charity and social enterprise
department, Bates Wells
• Erica Crump, Partner, Charity and social enterprise department,
• Alex Skailes, Director at the Centre for Charity Effectiveness,
Cass Business School
WHEN SHOULD A CHARITY IN
CRISIS CONSIDER MERGER?
THE SIMPLE ANSWER….
Before the crisis…..
But assuming that is too late:
WHAT KIND OF CRISIS?
Where the circumstances pose an immediate or imminent threat to the
• Existence (insolvency); or
• Ability to operate effectively
Unable to pay debts as they fall due or assets worth less than liabilities
An understandable truth: many mergers are undertaken or considered either
in, or to avoid, an imminent crisis
WHY DO WE WAIT FOR A CRISIS?
• We like what we do
• We like the way we do it
• We like to think we do it quite well
• We like things the way they are
• We trust ourselves and those closest to us more than others
• We like to maintain our own authority/autonomy
• We value the culture that we have become part of
• Disruption is time-consuming, unpleasant and wasteful
• Merger creates risk
• We don’t anticipate crises
All valid but not all purpose/beneficiary/outcome-focused
Are you actively considering merger?
MERGER: POSITIVE THOUGHTS
• Could our combined capabilities improve outcomes?
• Could we be better governed?
• Could we be better managed?
• What more income could we get?
• What costs could we save?
• What will it cost?
MERGER: NEGATIVE THOUGHTS
• What will my role be?
• Will I have a role?
• How do I protect my team’s influence?
• How do I preserve our culture?
• Will there be redundancies?
• What shall we call it?
Again, all valid but not purpose/beneficiary/outcome-focused
• Find your partner
• Early discussions
• Confidentiality agreement
• Deeper discussions:
• Compatibility of purposes
• Principles of structure:
• A to B?
• B to A?
• A+B to C?
• Principles of operations: who/what/how
• Heads of terms (dealing with the above)
• Due diligence
• Seeking regulatory approvals (if any)
• Consent from funders
• Consent from important contracting parties
• Consultation with employees
• Drafting transfer agreement:
• Passing over assets
• Indemnifying in relation to liabilities
• What assets are there?
• What are they worth?
• What are the business prospects?
• What liabilities are there?
• What are they worth?
• Other risks
• Other sticking points
HOW MUCH TIME HAVE YOU GOT?
• Insolvent organisation has much lower chance of achieving merger
• Also, very little bargaining power
• May be better for prospective partner to let it fail
• Not a great place to be
IS A MERGER FOR YOU?
• If so, start work now
• Don’t wait for a crisis
• Gather relevant data
• Work for best outcome with best partner
• Start preparing – what makes your organisation suitable/attractive?
• Build merger case OR consider other options…
CONSIDERING COLLABORATING IN A
• Why collaborate
• Different collaboration structures
• Case studies
• Share risk/strength in numbers
• Reduce costs/increase funds
• Sharing skills or knowledge
• Increased presence or digital
• Better services/preserve or prevent ceasing
• Opportunities from funders, stakeholders
OPTIONS FOR COLLABORATION
Collaboration options include entering into an informal alliance, a
collaboration agreement and setting up a new joint venture
entity. How many of these has your organisation done in the past?
4. All three
* Can (later) formalise the alliance through rules,
association/membership body or contract
The informal vs formal alliances – a group of organisations coming together
for better reach and impact during the crisis.
‘Let’s not stifle all the benefits with red tape…!’
‘We want there to be voting, democracy and accountability – and the ability to
go after funding’
Clear record of responsibilities
and division of risk/liability
Risk of project not ringfenced in
No separate legal entity to
Arguably less focused than
having a standalone JV
Easy to amend as collaboration
One party may need to take on
the lead (for example, with a
Can tailor agreement to needs
(simple and complex)
No separate entity for assets
The digital collaboration – a collaboration of third sector, commercial and
educational organisations to create a digital software product; aiming for
stage two joint venture
• The funder wanted it
• Strength in numbers
• Sharing risk
• The role of the lead partner
• Clear obligations
• Complex exit strategy
• No JV for the IP!
JOINT VENTURE ENTITY
Sometimes required by
funder or commissioner
setting up and managing a
Ring-fenced risk(?) Funder/commissioner may
require parent guarantees
Clear purpose/branding? Harder to exit
Separate legal entity which
can own IP and employ staff –
has its own board
No goodwill/reputation in the
• Preserve activities and assets for
• Cut costs
• Better service
• Loss of control
• May not be able to preserve all assets/staff
• May be complexities around transfer
HIVING OFF ACTIVITIES
The hive out and slow wind down – registered charity to
commercial purchaser and successor registered charity
• Need fair valuation of assets pre commercial purchase
• Can be complex to transfer IP/other assets
• Who will enforce?
• Be comfortable with loss of control
• Due diligence needed
NO RIGHT OR WRONG WAY….SOME THOUGHTS
• Clarity of purpose; Understand your long term impact; know
the added collective value – your impact and wider social value
• Leadership, individual and collective
• Time strengthens your negotiating position; Strategic moves
best done before urgency arises.
“everything we do depends for its quality on the
thinking we do first”
‘Ease creates. Urgency destroys’
SPECIFICS TO CONSIDER BEFORE ENTERING MERGER OR
COLLABORATIVE WORKING DISCUSSIONS
• Putting your house in order
• Driven by your beneficiaries needs – know your ‘glue’, WHY?
• What do you have to offer? What is it worth?
• How do you demonstrate? – stats and stories
• How well do you know your partner……and yourself?
HOW WELL DO YOU KNOW YOURSELF AND YOUR
Do your homework but avoid entering into analysis/paralysis mode
ASK THE DIFFICULT QUESTIONS, DON’T STAY IN YOUR
How do we get
out of this?
What will happen
How does this fit
with our metrics?
Who will be the
How do we tell our
How do we mirror the
with our Heads of
How many seats
will we get on
How can we
keep our name?
WHAT OTHER STRATEGIES ARE THERE?
Part of full closure? How can we do endings well?
Throughout one needs to
• Build trust – multi layered, many stakeholders
• Communicate constructively and communicate, communicate,
• It’s about taking those decisions that can make the biggest
difference and which are sometimes very unpalatable
Courage, commitment, communication and above all an
understanding of common purpose
• NCVO Knowhow merger guidance
• Bates Wells: A brief guide to mergers
• Bates Wells: Crisis Decision Tool
• IVAR/Bates Wells publication: Thinking about merger during
• CASS CCE’s free resources page
• Sayer Vincent Mergers made simple guide
• Challenges in Contemporary Governance Chair/Chief Executive:
working together to build resilience, Cass CCE (2020)
• The Art of Exit, Nesta (2012)
NCVO PRACTICAL SUPPORT OFFER
All organisations can access our NCVO Knowhow guidance, tools and resources.
Check out our NEW online training on NCVO’s training platform.
Watch out for our series of webinars in partnership with Zurich on risk management
Recording and signposting to relevant material will be sent round.
We would love to hear your feedback.
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movement to create a better society.
We connect, represent and support over 15,000
voluntary sector member organisations, from the
smallest community groups to the largest charities.
This helps our members and their millions of volunteers
make the biggest difference to the causes they believe
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