ACQ Community Care workshop Mergers etc

Better Business – Better

Caring

Joanne O’Brien

Carne Reidy Herd Lawyers

Level 10, 193 North Quay

Brisbane Qld 4000

P: 07 3236 2900

E: [email protected]

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


Agenda

• Not for profit focus

• Issues that I see driving change

• Options for working with other organisations

• What makes an effective arrangement

• Mergers & Amalgamations


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

– McCracken’s Case – Director ordered to pay

damages to creditors


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


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


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


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.


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


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


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


Why the Formality?

• It is a mechanism for ensuring the

organisation’s obligations to others are met

– Individual clients;

– The community;

– Staff;

• Means of exiting the arrangement


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


The Process

• Identification of appropriate merger

partner

• Memorandum of Understanding

• Confidentiality Agreement

• Due Diligence

• Merger Agreement

• Securing all necessary approvals

• Completion


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


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


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


Legal Due Diligence

• Corporate structure - constitution

• Board minutes

• ATO endorsements

• Regulatory compliance

• Ownership of assets

• Leases

• Agreements – funding bodies, service

providers, clients

• Employment


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


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


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


What creates success?

• Communication

• Co-operation

• Facilitation

• Information & Advice

• Documentation

The End

Joanne O’Brien

Carne Reidy Herd Lawyers

Level 10, 193 North Quay

Brisbane Qld 4000

P: 07 3236 2900

E:[email protected]

ACQ Community Care workshop Mergers etc

Documents

Transcript of ACQ Community Care workshop Mergers etc