Skylark Charity Support Network The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework A four stage approach to mergers within the charity sector 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. I Stage II Merger Strategy Guided by the Business Strategy determine a short-list of target merger candidates. END OF STAGE MILESTONES III Integration Planning Feasibility Exploring the potential benefits and risks of merging. What opportunity would the merger deliver both parties? Are the charities’ cultures compatible? Joint agreement to pursue IV Detailed Integration planning: How will the charities come together? How will the transition be handled? Formal due diligence. Agreement in principle of ‘Can’ they will come together The Skylark Merger Framework Integration/ Execution Implement the agreed plan, review and measure associated short and long term benefits. Transition New. Charity to be fully up and running as ‘businessas-usual’. GO/ NO-GO joint decision New. Charity fully up and running

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning I Stage II Merger Strategy III Feasibility IV Integration Planning Integration/ Execution 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 New. Charity business plan and develops a detailed implementation plan with costs and resources Integration Workstreams Outputs Leadership, Governance, Organisation, People & Culture Service & Beneficiaries v Detailed project plan and status updates v Completed MOU Financial v Financial and legal Due Diligence reports Legal Communications & Branding v Business Plan covering all organisational/operational areas with financial implications Facilities, IT & Systems Project management & Service Continuity v Agreed Legal Model and steps to achieve The Skylark Merger Framework

Skylark Charity Support Network Stage The Skylark Merger Framework Stage III: Integration Planning I II Project Management & Service Continuity Integration Workstreams Merger Strategy III Feasibility Integration Planning IV Integration/ Execution Leadership, Governance, Organisation, People & Culture Senior leadership, governance, CEO Appointment, HR issues, structure, people & change management Services & Beneficiaries Identifies any changes to the services or beneficiaries - what services, to whom and where Financial Historical and projected financials including funding impact, New. Charity Business Plan & risks Legal structure, constitutional and compliance processes such as Commercial contracts e. g. leases, funding Communications & Branding Develops New. Charity name, branding strategy and communications plan to stakeholders Facilities, IT & Systems Covers changes or improvements to properties and other assets Defines new ways of working and processes and how IT systems will support them The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning – Leadership, Organisation, People & Culture workstream Stage I II Merger Strategy Integration workstream: III Feasibility IV Integration/ Execution Integration Planning Leadership, Governance, Organisation, People & Culture Topics to Consider Outputs 1. Agree leadership and governance principles of New. Charity including the organisation structure by assessing alternative options 2. Assess culture of both organisations and synergies 3. Decide process for appointing CEO and appoint interim CEO 4. Assess HR Terms and conditions, HR policies & procedures, employee handbook, operating procedures 5. Assess contracted staff and volunteers, decide staffing and costs of proposed organisation including costs of any staff displacement 6. Assess if TUPE is applicable; if required, develop TUPE plan and costs 7. Make recommendations on HR including; • Staffing & retention procedures • common reward/pay strategy • common HR policies & procedures, T&C alignment, employee handbook and operating procedures, 1. 2. 3. 4. 5. Agreed CEO appointment process and Interim CEO Governance and Organisation structure, staffing and costs HR Transition plan (including TUPE) Proposed culture change programme New. Charity HR policies & procedures, employee handbook and operating procedures Tips – including supporting tools v Culture Assessment tool ü ü ü Take specific TUPE advice Invest in a new culture Leadership is central to organisational and cultural integration The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning – Services & Beneficiaries workstream Stage I II Merger Strategy Integration workstream: III Feasibility IV Integration/ Execution Integration Planning Services & Beneficiaries Topics to Consider Outputs 1. Review existing services for both parties 2. Agree joint services portfolio - where you are able to merge, replace or grow the services through combining charities. What services, to whom, where? 3. Align services to facilities, people and organisation • Carry out a skills to services gap analysis • Plan any necessary re-alignment to joint offering • Plan transition for any discontinued/re-aligned services 4. Review existing beneficiaries for both parties 5. Agree joint beneficiaries 6. Communicate with beneficiaries throughout transition important to keep the beneficiaries involved throughout the process to reduce fear of change. 1. 2. 3. 4. 5. Inventory of all services & beneficiaries Planned joint service portfolio & beneficiaries Skills to Services Gap analysis, action plan & costs Services Transition action plan Communication action plan Tips – including supporting tools ü Communicate with beneficiaries throughout transition Important to keep the beneficiaries involved throughout the process to reduce fear of change. ü Look for synergy – one service being enhanced by another ü Focus on defined beneficiaries and services not “all things to all men” The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning – Financial workstream Stage I II Merger Strategy III Feasibility Integration workstream: IV Integration/ Execution Integration Planning Financial Outputs Topics to Consider 1. Appoint External Financial advisor 2. Conduct financial due diligence including review of long term, ongoing contracts eg. property, software licences & service contracts, tax (VAT/PAYE/CT) • Review historic financials (income/ costs/ balance sheet) • Review accuracy of prior year forecasts • Review financial projections • Confirm consistency of accounting policies • Review financial controls and processes • Determine any future financial commitments 3. Identify costs of merger and sources of funding 4. Agree method to share costs between organisations 5. Develop draft future business plan & financial projections for merged entity 1. 2. 3. 4. 5. 6. 7. Audited accounts Management accounts Auditor management letters Budgets – past, present & future Financial procedures manual Budget for merger and sharing costs approach Business plan and financial projections of merged organisation Tips – including supporting tools v Charity Commission due diligence checklist v Financial due diligence template ü The more detailed the business plan the greater understanding of the future and the issues that might arise ü Finance team needs to be connected to all other workstreams to assess and calculate assets, costs and income ü Assess risk of changes in income (eg from grants/contracts to commercial/other sources) The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning – Legal workstream Stage I II Merger Strategy III Feasibility Integration workstream: IV Integration/ Execution Integration Planning Legal Topics to Consider Outputs 1. Appoint External Legal advisor 2. Agree method to share costs between organisations 3. Assess, explore and evaluate Legal structural options (A into B, A+ B =C etc) 4. Recommend composition of New. Charity Board including sub committees and any interim board structure 5. Determine process for appointment of Chair and other roles within New. Charity board 6. Develop new governance documents (memorandum & articles) 7. Consider legal implications of; • HR/people (TUPE) implications • Property ownership & leases • Other leases (eg IT) • Commercial contracts • Funding/income grants and contracts 8. Check current Charitable objects and proposed changes 9. Determine Process and timetable for closures, transfer of duties and responsibilities and sign-offs 1. 2. 3. 4. 5. Proposed legal structure and rationale Proposed composition of Board and Chair appointment process Confirmation of New. Charity Charitable objects and any changes New governing documents Process & timetable for closures, transfer and sign-off Tips – including supporting tools ü Consider single source of legal advice but each Board take independent advice if necessary ü Confirm scope of ‘Non Disclosure Agreement’ up to Go/No-Go ü Check time required for legal changes do not impact on critical path The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning – Communications & Branding workstream Stage I II Merger Strategy Integration workstream: III Feasibility 2. 3. 4. 5. 6. 7. 8. Integration/ Execution Integration Planning Communications & Branding Topics to Consider 1. IV Stakeholder management and involvement • External; beneficiaries, funders, influencers, government • Internal; management, staff, trustees, volunteers Key messages relating to merger – rationale, vision of future and benefits Communication media – how to get messages to stakeholders; face to face, email, web, external PR? Timing of initial and sustained messages Costs and responsibilities Launch event(s) eg conference and detailed plan and costs Develop and agree New. Charity name development and sign-off process Research and test “Brand Value” of old names versus values of New. Charity Outputs 1. 2. 3. Detailed Communications Plan New. Charity name and rationale New. Charity name launch and plan Tips – including supporting tools ü ü ü If you don’t communicate – others will do it for you! Professional and sustained communication will add value – inconsistent, fragmented communication will erode value Communication Plan outline The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning – Facilities, IT & Systems workstream Stage I II Merger Strategy Integration workstream: III Feasibility Integration Planning IV Integration/ Execution Facilities, IT & Systems Topics to Consider 1. Review of current facilities v. needs of new organisation 2. Define accommodation strategy for combined organisation – short and medium term • Develop cost estimates including refit and cost of transition/relocation – lease terminations etc • Develop transition plan 3. Ways of working and business processes to be assessed and compared 4. Proposed new processes (best of/adoption/new) 5. Assess systems and their effectiveness in supporting processes 6. Assess IT landscape – hardware and software 7. Develop options for IT integration – costs/technical 8. Assess external support / outsourcing Outputs 1. Assessment of current facilities v. needs of new organisation 2. Accommodation strategy for combined organisation including a list of potential suitable accommodation and costs of refit and relocations 3. Transition plan including integration of business processes 4. IT Strategy and plan Tips – including supporting tools ü Assess medium term property strategy not just short term ü Ensure property strategy supports overall strategy ü Consider the future strategy of New. Charity and changes in business processes /ways of working before confirming IT strategy and plan The Skylark Merger Framework

Skylark Charity Support Network The Skylark Merger Framework Stage III: Integration Planning – Project Management & Service Continuity workstream Stage I II Merger Strategy Integration workstream: III Feasibility 3. 4. 5. 6. Integration/ Execution Integration Planning Project Management & Service Continuity Topics to Consider 1. 2. IV Outputs Map services, responsibilities and continuity risks Develop a detailed Service Continuity plan; how and when will services from both organisations be maintained until New. Charity is fully operational? Appoint Merger Project Manager Develop detailed project plan, including links between each of the workstreams Agree and execute Project management process (eg conference calls/meeting schedules/ meeting notes etc) Develop risk register to ensure all parties are aware and actively manage risks 1. 2. 3. 4. Service continuity plan Detailed Project plan Project Management process Risk register Tips – including supporting tools ü ü Service continuity is the foundation of a successful integration Effective project management requires investment in a good project manager, sufficient resources and management time The Skylark Merger Framework