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ACQ Community Care workshop Mergers etc

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Joanne O'Brien

The document discusses options for not-for-profit organizations to collaborate or merge in order to address increasing legal and funding pressures. It outlines drivers for change like greater regulation and aging leadership. Options presented include resource sharing, joint projects, and formal partnerships documented by memorandums of understanding or contracts. The process of merging is described, from initial agreements to due diligence and integration. Key steps like confidentiality, legal reviews, and merger documentation are emphasized to facilitate a successful combination of organizations.

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Better Business Better Caring Joanne OBrien Carne Reidy Herd Lawyers Level 10, 193 North Quay Brisbane Qld 4000 P: 07 3236 2900 E: jobrien@crhlaw.com.au
Carne | Reidy | Herd Making Your Business Better Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skilful execution. --William A. Foster
Carne | Reidy | Herd Agenda Not for profit focus Issues that I see driving change Options for working with other organisations What makes an effective arrangement Mergers & Amalgamations
Carne | Reidy | Herd The Drivers Legal Drivers Increasing regulation Penalties attaching to Directors & Senior Executives as well as corporate entities Increasing potential for Directors to have personal liability Centro Case Directors are expected to have at least a basic level of financial literacy & cannot just rely on external experts McCrackens Case Director ordered to pay damages to creditors
Carne | Reidy | Herd The Drivers Non Legal Drivers Government funding agencies driving productivity increases Ageing board members & shrinking communities Competing demands being made on individuals with the capacity/ability to join a board
Carne | Reidy | Herd Building a Better Business Bigger does not always equal Better The way to maximise your potential may in fact be to leverage what you already have Collaborative arrangements Client referrals Resource sharing Co-location Memorandum of Understanding
Carne | Reidy | Herd Building a Better Business Brokerage Joint Projects Disposal of non-performing assets &/or services & focus on the core strengths of your service delivery Merger or Amalgamation requires seminal decisions on future viability & identity
Carne | Reidy | Herd Potential Partners Range of partners depending on skill or service needs Residential Aged Care Facilities Other Community Care Providers Allied Health Services CALD & ATSI service providers Disability sector Service organisation & Regional councils For profit or not for profit.
Carne | Reidy | Herd Big Brother Funding provider & Funding Agreements In developing relationships keep in mind: Availability of funds Services the organisation has agreed to provide or is funded to provide Any restrictions on who the organisation can contract with Approvals required & how long they take to secure Terms which must be included in contracts
Carne | Reidy | Herd Formalising Arrangements Verbal you can just talk about what you want to do. Some writing minutes of meetings, exchange letters. Formal contract clearly sets out what has been agreed Aim should be to minimise the scope for misunderstanding about the responsibilities
Carne | Reidy | Herd Why the Formality? Facilitate reporting under Funding Agreement Incorporate an agreed framework for recording activities, clients & costs Create transparency in relation to expenditure Clear audit trail of where & how money is spent Mechanism for ensuring each partner keeps their side of the deal Ensures performance by clearly defining roles & responsibilities Enables any failure to deliver to be easily identified
Carne | Reidy | Herd Why the Formality? It is a mechanism for ensuring the organisations obligations to others are met Individual clients; The community; Staff; Means of exiting the arrangement
Carne | Reidy | Herd Mergers & Amalgamations What are they? Combining of two entities into one through acquisition or pooling of resources Involves a change in legal structure for at least one of the entities It is the substance of what occurs that is important, not the name you give to it
Carne | Reidy | Herd The Process Identification of appropriate merger partner Memorandum of Understanding Confidentiality Agreement Due Diligence Merger Agreement Securing all necessary approvals Completion
Carne | Reidy | Herd MOU MOU or Heads of Agreement Generally not legally binding but some parts of it may be e.g. cost sharing Outline what is agreed Commitment to work toward a binding agreement Undertaking to not consider any other partner while negotiations underway Participate in due diligence
Carne | Reidy | Herd Confidentiality Confidentiality agreement Must be legally binding Protection of commercially sensitive information Protection of personal information Usually requires the parties to keep the fact that they are negotiating confidential Agreed protocols for any public announcements
Carne | Reidy | Herd Due Diligence The extent of due diligence investigations can vary depending on the nature of the organisations & any shared history: Legal Financial HR Buildings/Infrastructure Clinical
Carne | Reidy | Herd Legal Due Diligence Corporate structure - constitution Board minutes ATO endorsements Regulatory compliance Ownership of assets Leases Agreements funding bodies, service providers, clients Employment
Carne | Reidy | Herd Merger Agreement Content will depend on how the transaction is structured Also dependent on issues identified in the due diligence Will cover agreement as to: Transfer of assets & liabilities New corporate structure Transfer of client agreements & employees
Carne | Reidy | Herd What to Avoid Demerger mergers fail because of poor planning, poor execution & incompatability Poorly drafted MOU Did not sign MOU & Confidentiality Agreement No legal due diligence No merger agreement Joint CEOs
Carne | Reidy | Herd What to Avoid Result of a Demerger Significant financial cost Risk of damage to reputation Potential impact on future tenders Opportunity cost Physically & emotionally exhausting for the Board & senior staff members
Carne | Reidy | Herd What creates success? Communication Co-operation Facilitation Information & Advice Documentation
The End Joanne OBrien Carne Reidy Herd Lawyers Level 10, 193 North Quay Brisbane Qld 4000 P: 07 3236 2900 E:jobrien@crhlaw.com.au

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ACQ Community Care workshop Mergers etc

  • 1. Better Business Better Caring Joanne OBrien Carne Reidy Herd Lawyers Level 10, 193 North Quay Brisbane Qld 4000 P: 07 3236 2900 E: jobrien@crhlaw.com.au
  • 2. Carne | Reidy | Herd Making Your Business Better Quality is never an accident; it is always the result of high intention, sincere effort, intelligent direction and skilful execution. --William A. Foster
  • 3. Carne | Reidy | Herd Agenda Not for profit focus Issues that I see driving change Options for working with other organisations What makes an effective arrangement Mergers & Amalgamations
  • 4. Carne | Reidy | Herd The Drivers Legal Drivers Increasing regulation Penalties attaching to Directors & Senior Executives as well as corporate entities Increasing potential for Directors to have personal liability Centro Case Directors are expected to have at least a basic level of financial literacy & cannot just rely on external experts McCrackens Case Director ordered to pay damages to creditors
  • 5. Carne | Reidy | Herd The Drivers Non Legal Drivers Government funding agencies driving productivity increases Ageing board members & shrinking communities Competing demands being made on individuals with the capacity/ability to join a board
  • 6. Carne | Reidy | Herd Building a Better Business Bigger does not always equal Better The way to maximise your potential may in fact be to leverage what you already have Collaborative arrangements Client referrals Resource sharing Co-location Memorandum of Understanding
  • 7. Carne | Reidy | Herd Building a Better Business Brokerage Joint Projects Disposal of non-performing assets &/or services & focus on the core strengths of your service delivery Merger or Amalgamation requires seminal decisions on future viability & identity
  • 8. Carne | Reidy | Herd Potential Partners Range of partners depending on skill or service needs Residential Aged Care Facilities Other Community Care Providers Allied Health Services CALD & ATSI service providers Disability sector Service organisation & Regional councils For profit or not for profit.
  • 9. Carne | Reidy | Herd Big Brother Funding provider & Funding Agreements In developing relationships keep in mind: Availability of funds Services the organisation has agreed to provide or is funded to provide Any restrictions on who the organisation can contract with Approvals required & how long they take to secure Terms which must be included in contracts
  • 10. Carne | Reidy | Herd Formalising Arrangements Verbal you can just talk about what you want to do. Some writing minutes of meetings, exchange letters. Formal contract clearly sets out what has been agreed Aim should be to minimise the scope for misunderstanding about the responsibilities
  • 11. Carne | Reidy | Herd Why the Formality? Facilitate reporting under Funding Agreement Incorporate an agreed framework for recording activities, clients & costs Create transparency in relation to expenditure Clear audit trail of where & how money is spent Mechanism for ensuring each partner keeps their side of the deal Ensures performance by clearly defining roles & responsibilities Enables any failure to deliver to be easily identified
  • 12. Carne | Reidy | Herd Why the Formality? It is a mechanism for ensuring the organisations obligations to others are met Individual clients; The community; Staff; Means of exiting the arrangement
  • 13. Carne | Reidy | Herd Mergers & Amalgamations What are they? Combining of two entities into one through acquisition or pooling of resources Involves a change in legal structure for at least one of the entities It is the substance of what occurs that is important, not the name you give to it
  • 14. Carne | Reidy | Herd The Process Identification of appropriate merger partner Memorandum of Understanding Confidentiality Agreement Due Diligence Merger Agreement Securing all necessary approvals Completion
  • 15. Carne | Reidy | Herd MOU MOU or Heads of Agreement Generally not legally binding but some parts of it may be e.g. cost sharing Outline what is agreed Commitment to work toward a binding agreement Undertaking to not consider any other partner while negotiations underway Participate in due diligence
  • 16. Carne | Reidy | Herd Confidentiality Confidentiality agreement Must be legally binding Protection of commercially sensitive information Protection of personal information Usually requires the parties to keep the fact that they are negotiating confidential Agreed protocols for any public announcements
  • 17. Carne | Reidy | Herd Due Diligence The extent of due diligence investigations can vary depending on the nature of the organisations & any shared history: Legal Financial HR Buildings/Infrastructure Clinical
  • 18. Carne | Reidy | Herd Legal Due Diligence Corporate structure - constitution Board minutes ATO endorsements Regulatory compliance Ownership of assets Leases Agreements funding bodies, service providers, clients Employment
  • 19. Carne | Reidy | Herd Merger Agreement Content will depend on how the transaction is structured Also dependent on issues identified in the due diligence Will cover agreement as to: Transfer of assets & liabilities New corporate structure Transfer of client agreements & employees
  • 20. Carne | Reidy | Herd What to Avoid Demerger mergers fail because of poor planning, poor execution & incompatability Poorly drafted MOU Did not sign MOU & Confidentiality Agreement No legal due diligence No merger agreement Joint CEOs
  • 21. Carne | Reidy | Herd What to Avoid Result of a Demerger Significant financial cost Risk of damage to reputation Potential impact on future tenders Opportunity cost Physically & emotionally exhausting for the Board & senior staff members
  • 22. Carne | Reidy | Herd What creates success? Communication Co-operation Facilitation Information & Advice Documentation
  • 23. The End Joanne OBrien Carne Reidy Herd Lawyers Level 10, 193 North Quay Brisbane Qld 4000 P: 07 3236 2900 E:jobrien@crhlaw.com.au