Learning from Mergers - the case studies

Community Council
for Somerset and
Community Action
SOMERSET

Community Action and Community Council for Somerset

(CCS) decided in May 2009 that they would pursue closer
collaboration or merger. They progressed some way with
merger discussions and planning before the process was
abandoned in April 2010. Since then, Community Action has
begun the process of closing down.
CCS and Community April 2009
Action work in Shared Business Community Council for Somerset (CCS) is a Rural Community Council
partnership on a Development (RCC) working within the county of Somerset. Community Action North
number of projects Officer recruited Somerset, South Gloucestershire and Bath & North East Somerset
June 2009
(Community Action) was the Rural Community Council that operated
Initial discussions on
within the former county of Avon.
merger begin
Both organisations were part of the South West ACRE Network (SWAN), an
Preparatory work
RCC network for the South West region. As RCCs, the two organisations
before merger is
proposed to boards had very similar objectives – to support people who live and work in rural
January 2009
communities. Their activities included helping to maintain local services
Boards agree in
such as shops, post offices and village halls, delivering community transport
principle to pursue
merger; Steering services, facilitating parish planning and doing community support work.
Steering Group Group established Both charities were small; CCS had 14 staff, while Community Action had
undertakes and met five staff and had been steadily contracting in size since 2007.
discussion around
collaboration and
The two organisations had worked on a number of joint projects from
merger. Processes
for making the 2008. During this time they developed a good working relationship on an
decision about operational level, although their boards had had limited communication.
merger undertaken Their joint working culminated in recruiting a shared Business Development
e.g. full financial due
diligence process
Officer in April 2009, whose role was to identify new opportunities for the
two organisations, such as tenders for service delivery.
April 2010
Merger abandoned

30th April 2010

Community Action
ceases trading

Page 2
“The District Council thought
it was forward thinking
because we were doing it off
our own back and were not
being told to do it.”
Stakeholder
Learning from Mergers - the case studies
Community Council for Somerset and Community Action
Motivations for merger
Discussions started as CCS and Community Action were both looking to
grow and strengthen their organisations, and saw an opportunity to do this
by pooling skills and experience. As a result of previous joint working, they
were aware that their staff worked well together – but because skill sets
were complementary, merger or collaboration was unlikely to necessitate
many changes in staffing. They also spotted the opportunity to make cost
savings through sharing back office resources.
The fact that the two organisations were a ‘good fit’ was also a motivational
factor. They had very similar charitable aims and objectives. Both
organisations had the support from national bodies in pursuing merger,
including the Charity Commission and Action with Communities in Rural
England (ACRE).
The two organisations also believed that merger would give them a better
chance for survival in the current financial climate. This was particularly
important for Community Action, the smaller of the two organisations,
whose capacity (both staff and finances) had been steadily shrinking over
the past two years. As such, Community Action was finding it harder to
bid for new work and to have a meaningful presence ‘on the ground’.
One further driver for Community Action was that at the time, it was an
unincorporated association, but had been looking at forming a Company
Limited by Guarantee. Merging would have made it unnecessary to go
through this process.
Meanwhile, Community Council for Somerset’s Chief Executive had recently
moved on, and the Board was looking at options for future development.
One option identified was to strengthen by collaborating or merging with
another organisation.
Moving towards merger
The organisations began considering a potential collaboration or merger
in May 2009.
Initially, the chairs and chief officers met to discuss the possibilities. At this
meeting, they decided to look at ways to collaborate further and possibly
to merge. This proposal was taken to each board of trustees separately,
and both agreed to pursue collaboration or merger.
Both organisations then consulted with their key funders and stakeholders
about the plans, which were met with a positive response.
CCS and Community Action secured funding from Capacitybuilders’
Modernisation Fund, which was used to support the financial due diligence
process and to obtain legal advice, for example about what the process
would mean for trustees. At this time, the two organisations started to
develop a joint strategic and operational business plan to explore how
further collaboration or a merger would work in practice – also utilising
funds from Capacitybuilders.

Page 3
“We did a lot of internal
scrutiny which was one of
the things that whether we
went ahead [with the merger]
or not, was useful, as we
wouldn’t have taken the time
to do this otherwise. We
really scrutinised where we
were financially, and where
we could make individual and
joint savings.”
Stakeholder
“It was important for us
to get advice on financial
implications, as this was part
of our decision [to go ahead
with the merger] – how much
it would all cost.”
Stakeholder
“We got as far as looking
at everything and then
saying ‘do we want to go
any further?’. The next step
would have been to go to
our solicitors and get advice
on what form it [the merger]
would have taken, but we
didn’t get to that stage.”
Stakeholder
Learning from Mergers - the case studies
Community Council for Somerset and Community Action
Internally, a steering group was established, made up of two board members
and the Chief Executives from each organisation. The group discussed
strategic issues and practicalities of further collaboration or merger, such
as cultural and financial implications. Following each meeting, members
of the steering group were tasked with exploring specific aspects in more
depth. This process was considered useful in itself.
An away day was arranged for all staff from the two organisations. The
aim of this was to bring staff together to discuss commonalities in working
practices, current activities and ways they could develop and expand as
a joint entity. This was seen from both sides as a successful part of the
process. From this, working groups were established, made up of staff
from both organisations. These looked at particular topics related to the
merger, such as the administrative function and communications.
Both organisations regularly discussed progress with trustees at board
meetings. Through these meetings, both organisations wanted to ensure
their trustees understood the whole process, including what it would mean
for them individually and as a board. During these discussions, it became
clear that merger, and not further collaboration, should be the ultimate
outcome of the process.
The organisations also talked to other local charities that had gone through
merger, including some that had tried and failed, and got advice on things
such as pitfalls, financial implications and marketing.
The decision not to proceed
When the decision was made not to proceed with the merger in April 2010,
both organisations had gone quite a long way through the merger process.
Due diligence had been completed, they had set up a joint steering group,
and were looking in detail at the practicalities of merger and what it would
look like.
In the months leading up to this decision, regular joint steering group
meetings had been taking place. However, as these went on, it started to
become clear that the merger process was not going to be as smooth as
the organisations had hoped. Before due diligence had been completed,
Community Action received confirmation from their pension fund that
none of the deficit could be written off. Because of this perceived financial
vulnerability, one of its major funders took the decision not to fund the
organisation in the 2010-11 financial year.
The due diligence report left the CCS board uneasy about taking on
liabilities that Community Action would bring if the merger went ahead,
particularly as board members would be personally responsible given
Community Action was unincorporated. As such, the CCS board took
the decision that at this time, the business case for going ahead with the
merger was not strong enough – merger would be expensive and it would
be time consuming to deal with the liabilities.

Page 4
“The fact that staff teams got
on so well was really good
and very important. We set
up 3-4 different staff groups
looking at things such as
how we can make savings,
how staff can work together,
TUPE, communications/IT,
and finance – so from that
point of view it worked really
well”
Stakeholder
“[The organisational structure
review] was really pushed
ahead by the merger process.
That will strengthen us and
hopefully we’ll make some
efficiency savings in the
future.”
Stakeholder
“[CCS’s board] ended up
performing much better as a
board and asking pertinent,
challenging and relevant
questions”.
Stakeholder
Learning from Mergers - the case studies
Community Council for Somerset and Community Action
While the due diligence report was the ‘catalyst’ for the merger to be
abandoned, some other issues also contributed. The main challenge
identified was uneven levels of appreciation and buy-in to the merger
process by the two boards.
Another challenge was the timeframe the two organisations were
constrained by, meaning they progressed toward merger faster than
they otherwise might have done, bearing in mind the complexity of the
issues they needed to work through with their trustees. However, neither
organisation cited this as having had any bearing on the outcome of the
process.
In the end, the decision was based on a mutual understanding. However,
as a result of these events and the decision not to merge, the board of
Community Action took the decision to close down, immediately making all
staff redundant and winding up all trading activities. Both organisations were
disappointed by this outcome, but understood why the decision was made.
Positive aspects of the process
Although the merger was abandoned before completion, those involved
identified several positive aspects and outcomes of the process.
The staff away days worked particularly well. Through this process, both
staff teams engaged with each other well and as a result, were very positive
about the process and the merger itself.
Chief officers worked together and supported each other closely throughout
the process, which helped to give staff teams confidence in the merger.
The process also made it necessary to carry out a detailed internal review.
In CCS’s case, this has meant that the organisation has been able to
address some of the issues that originally acted as motivations for merger.
For example, an internal assessment of efficiency and effectiveness has led
CCS to undertake an organisational structure review and job evaluation
process, to ensure it has the right staffing structure and job roles for the
organisation.
CCS is also looking to adopt the strategic plan that was developed through
the merger process. Through this, they plan to bring in new opportunities,
posts and activities to their members. The process has also helped to
strengthen the CCS board of trustees, through engaging and working
closely with them throughout the process.
 Learning from Mergers - the case studies
Page 5 Community Council for Somerset and Community Action

Lessons Learned
• Be really clear at the beginning of your motivation for merger and keep that in mind throughout the process,
as it is very easy to lose focus as it can take a lot of time and effort
• Be realistic about timeframes for merger, especially when working with voluntary boards where it may take
time to fully communicate the process and its benefits
• Be clear about how much time it takes and the time it takes away from day to day work. Working towards
merger is a sizeable commitment for the people involved
• Work very carefully with your board, as they have the power to make the merger happen or not. It is important
that they understand that and what the potential implications could be (e.g. change in Board constitution)
• Facilitate joint board meetings early on in the process to discuss the merger and the whole process for each
board to get a better (and shared) understanding at an early stage
• It is important to bring staff teams together at an early stage and getting them involved in addressing some
of the practicalities and how things would operate under a new structure. This has the benefit of keeping the
board focused on strategic issues rather than the detail – which staff are better placed to work through
• Things happen quickly from day to day, so it is important to keep everyone (staff, trustees and stakeholders)
up to date with developments as far as possible