Boards with Purpose - Elizabeth Wighton and Victoria Adams

00:00:08:04 - 00:00:49:06 

Phil 

All right. Welcome to this episode of boards with purpose, where we're chatting about mergers and acquisitions with Elizabeth Wighton and Victoria Adams. A little bit of background on merger and merger activity in the not for profit sector. I've been surprised that we haven't seen more mergers and more discussion around mergers. The last edition of the NFP study, I think 5% of organisations were undertaking a merger, 20% were discussing mergers, but even then they thought they were unlikely to probably happen in the next 12 months. 

  

00:00:49:11 - 00:01:05:02 

Phil 

Another 6% said they'd be discussing winding up, and that might be another part of the conversation we can have today. But are you, Elizabeth, seeing more activity in the mergers space for the work that you're involved with? 

  

00:01:05:04 - 00:01:29:10 

Elizabeth 

Look, I am like you, though I was surprised with those numbers. I would expect them to be higher. I think overall with the sector, though, when charities are not for profits, are thinking about mergers. A lot of what I see is less of that strategic acquisition focus, where charities and not for profits are looking for particular targets and looking for who they can acquire. 

  

00:01:29:12 - 00:02:04:23 

Elizabeth 

I see a lot more of it being opportunistic, where organisations, for whatever reason, are putting themselves forward, saying to someone want to acquire us, or organisations are having conversations coming together and saying, does this make sense for us to work? So a lot of it. I'm seeing is motivated by financial pressures and financial distress, whether that's as far as an organisation's under administration or whether it's more what they're seeing in terms of their financials, future funds flow from government or whatever else. 

  

00:02:04:23 - 00:02:23:03 

Elizabeth 

And then that's being the motivation to have the conversation. So it's not that sitting around the board table like, and I'm on the board of a charity as well for me when the discussions have happened. It's been someone's come to us and said, we've got some difficulty, would you think about acquiring us? 

  

00:02:23:04 - 00:02:32:09 

Phil 

And that may not be the best time to be considering mergers, right? You're wanting to be doing it at the right time? 

  

00:02:32:11 - 00:02:33:23 

Elizabeth 

Yeah, absolutely. 

  

00:02:33:23 - 00:02:57:09 

Victoria 

I think people need to work out whether why they're merging and if it's to try to rescue yourself from a distressed situation, that's not always the right time to be doing it. So both partners in a in a merger situation need to be ready for for a merger. And it means you have to have your own house in order effectively before you look for merger partners, so that you will be ready for that due diligence process. 

  

00:02:57:09 - 00:03:22:03 

Victoria 

And you'll be able to work out what what synergies you might be able to achieve by merging the two businesses together, particularly if you're trying to save one or other from a distressed financial situation, you need to be able to identify some areas where you're where you are able to get some financial uplift or otherwise you're just going to be effectively buying someone else's problem or or absorbing someone else's liabilities. 

  

00:03:22:04 - 00:03:50:09 

Victoria 

And you could end up with a with a worse financial position than you've currently got. So I think people need to think through their strategy about why they would want to merge, or why they would want to acquire another, another not for profit, and make sure that that the target is actually consistent with your strategy, whether it's to diversify your revenue streams or to to expand into different geographies, for example, or to get head office synergies and efficiencies on systems, things like that. 

  

00:03:50:09 - 00:03:55:22 

Victoria 

But if there's no strategic rationale, merger for mergers sake is not is not the way to go. 

  

00:03:55:24 - 00:04:00:14 

Phil 

Maybe tell us a little bit more about what your organisation does in this space. 

  

00:04:00:15 - 00:04:35:20 

Victoria 

Sure. So for purpose investment partners, we're a not for profit fund manager. We're focussed on social impact. So we look for businesses and opportunities in in predominantly in care sectors. So we think about things like aged care, disability services, disability accommodation, education, early learning and social and affordable housing. We often structure through our acquisitions through not for profits, not always, but most of the time we believe that not for profit thinking, combined with really good financial commercial rigour, brings the best of both worlds together. 

  

00:04:35:20 - 00:05:02:09 

Victoria 

And we do see obviously some benefits from structuring as not for profit in care sectors. You can get things like the benefits of of payroll tax exemption, stamp duty exemption in certain cases and also salary packaging for staff. And the salary packaging for staff can be relatively good incentives for people to stay with a not for profit, rather than they're moving to a for profit in in in a sector such as aged care. 

  

00:05:02:11 - 00:05:24:14 

Victoria 

So we try to grow businesses so that we can grow our impact. We focus very much on on social impact and what can we measure and how do we use the the improved financial position of the businesses to get better outcomes for for the customers, residents, you know, clients in, in our businesses. So but also better conditions for staff. 

  

00:05:24:15 - 00:05:46:18 

Phil 

Fantastic. I come back to purpose a little bit later with both of you. But Elizabeth, in terms of the organisations you're helping, go down that merger path, what are some of the things that you suggest to boards to be considering when they might even just be at the very early stages of thinking about mergers? 

  

00:05:46:23 - 00:06:10:20 

Elizabeth 

So a great question. I think what Victoria has talked about, about that merger readiness is absolutely fundamental. I think the sector as a whole. There's so much of a sense of people are in it because they're passionate about what they're doing. They want to serve. And it can be so easy when an organisation comes to you as the board sitting around that board table to have that sense of, we want to do the right thing. 

  

00:06:11:01 - 00:06:44:16 

Elizabeth 

If not us, then who are going to help these people? What is the future of this organisation going to be without us? And that's a wonderful attitude. It's something I love about the sector, but that sense can't displace for a board. There need to be actually thinking about the merger acquisition more holistically and really coming back to their purpose and their director's duties and saying, well, fundamentally, we need to act in the best interests of our organisation and be thinking through all those certain things. 

  

00:06:44:18 - 00:07:06:18 

Elizabeth 

And that due diligence, that initial due diligence is really key. I work with a lot of organisations where there's a sense of, well, we're going to go through with this no matter what, but it's working through with them the legal due diligence, making sure they're getting financial due diligence done to understand the risks they're taking on, the liabilities they're taking on. 

  

00:07:06:18 - 00:07:25:11 

Elizabeth 

And actually, is this really the right thing for them? And if so, and if they're going to go ahead no matter what, what protections do we need to put in place. How do we structure this? How do we frame this to make sure you're not taking on something that's actually going to be really detrimental for the existing organisation. 

  

00:07:25:12 - 00:07:50:16 

Phil 

And it's great to have that. Both of you are both directors as well as experts in your respective fields. Right? So getting that understanding of both from both sides. So I'm assuming there's going to be some tax stamp duty, all sorts of implications that directors may not have considered when they first come up with this idea that emerge is a good idea. 

  

00:07:50:20 - 00:08:19:09 

Elizabeth 

Yeah, absolutely. And that's one of the unique things about charity and not for profit mergers and acquisitions is thinking that through. So as an example, if you're dealing with a charity, you yourself will have an existing charitable purpose registrations with the A, C and C and flowing from that particular Commonwealth level. Charity tax concessions, the target entity, the entity you might look in might be looking to merge with. 

  

00:08:19:10 - 00:08:39:16 

Elizabeth 

It may also be a charity or not for profit. If it is, you need to be thinking about, well, you actually have the same charitable purpose. You might be doing similar things, but be registered and operating in different ways. So you need to make sure there's alignment there in terms of those. There's nothing to stop a charity acquiring a for profit as well. 

  

00:08:39:16 - 00:09:10:16 

Elizabeth 

And part of that then is thinking through and getting good advice on, are you going to bring this entity and do a structure and turn it into a charity or not for profit, and how is that going to work to make sure that's timed beautifully with completion and the different regulator requirements? If you're going to keep it as a for profit, lots of considerations then around we don't want charitable assets going to a for profit in breach of any of your governance considerations. 

  

00:09:10:16 - 00:09:38:14 

Elizabeth 

But something I work with a lot of clients with is there's a sense that, oh, we're registered charity. We're going to get every single tax concession. It's fine. But it's understanding that the Commonwealth regime is different to the state and territory regimes. So you actually need to be getting advice and thinking about, are we going to be eligible for any transfer, stamp duty, land tax, payroll tax exemption and doing separate applications for them as part of the process? 

  

00:09:38:15 - 00:09:39:01 

Elizabeth 

Yeah. 

  

00:09:39:02 - 00:10:15:17 

Victoria 

Yeah, it can actually impact your merger timeline as well. So we had a situation in our aged care business where we were buying a not for profit, sorry, a not for profit was buying a for profit and converting it into a not for profit. And we couldn't get a clear, I guess, decision out of one of the states on on the stamp duty position and it could have dragged on for months and months, which means it's months and months of of not undertaking the acquisition and starting your integration and, you know, effectively benefiting from, from ownership of that business that you miss out on. 

  

00:10:15:17 - 00:10:32:20 

Victoria 

So you have to make a decision. Do you go ahead with the stamp duty. And we're still awaiting a decision on that many years later. So it happens. It can you do really need to think about a think about that particularly if there are for profit entities in in the mix as well as the not for profits. 

  

00:10:32:22 - 00:10:34:14 

Phil 

Are some patients required? 

  

00:10:34:15 - 00:10:35:10 

Victoria 

Definitely. 

  

00:10:35:11 - 00:10:58:20 

Elizabeth 

And on that there's all the unique charity tax concession kind of pieces. But in a lot of ways like this is regulated in the same way as any other form of acquisition. So if you think about the new merger control regimes, that's something that actually needs to be considered. And if those requirements are going to be triggered, that also needs to be built into the timelines, which can be really significant to. 

  

00:10:59:00 - 00:11:09:07 

Phil 

Want to pick up a little bit on the cultural side and the impact of culture when mergers coming together, the observations you've got from what you've been involved. 

  

00:11:09:07 - 00:11:31:20 

Victoria 

Yeah, it's really interesting, actually. It's one of the things that we see derailing mergers quite regularly is if you're trying to bring two businesses together, even if they're in the same sector, they may have come from very different origins and have very different cultures. And if you've got two sets of directors, two sets of management trying to work out what you want, the culture of the future organisation to be can be very challenging. 

  

00:11:31:20 - 00:11:53:24 

Victoria 

And if there's a big disconnect between the two boards, for example, you may not ever reach agreement because it may not be considered kind of in the best interests of one or other of of the entities. For us, by buying a not for profit into a for profit, into a not for profit, we we did see very different style of thinking. 

  

00:11:53:24 - 00:12:18:16 

Victoria 

This is in the aged care business they had been the target had been extremely focussed on financials. That was their primary goal. Their primary goal was to to to be as profitable as possible. We think slightly differently in that we we want to be financially sustainable and to be able to service our capital and, you know, get a reasonable return for our investment. 

  

00:12:18:16 - 00:12:43:04 

Victoria 

But we don't think about every last dollar in that way. So if we create additional value in the business, we want to invest it into our charitable purpose. So we really think about from that perspective, we had to work with staff that came along with the with the acquisition to change that. Thinking a little bit around, it's not necessarily about, you know, the the last dollar. 

  

00:12:43:04 - 00:13:10:09 

Victoria 

It's really about high quality service for our residents in aged care. And that will mean that ultimately you get better occupancy. Better occupancy leads to better financial returns. Better conditions for staff actually lead to better retention, lower training, training costs, lower use of agency, for example, and better outcomes for residents because they they end up seeing the same people and are able to establish a relationship with them, including the families and and the residents. 

  

00:13:10:09 - 00:13:34:12 

Victoria 

So there we see kind of alignment between that financial purpose and the charitable purpose effectively. But the culture, it's it's something you always have to work through. It's one of the things that's quite difficult to a certain from, from outside the tent until you're kind of in there and working that through is is really part of a successful integration of two businesses, indeed. 

  

00:13:34:12 - 00:13:48:06 

Phil 

But I'd imagine there's also some, some quite good learnings that can come from those different cultures as well. Right. So from the more profit focussed of how can you have a more commercial element while maintaining that for people? 

  

00:13:48:08 - 00:14:07:03 

Victoria 

We think of ourselves as trying to bring the best of both worlds. So if you can get some of that financial rigour, as well as people who are focussed on outcomes for residents and quality of care and, you know, really looking after people, including the staff, you can have the best of both worlds if you can, if you can get it right. 

  

00:14:07:04 - 00:14:35:02 

Phil 

Yeah. Nice one. I'm mindful NFP governance principles that we put out a number of years ago and have kept refreshing the focus. Principle number one is around purpose, right. And that's what we're we're we're in a four purpose sector. Are you getting a sense of being able to measure better meeting of the purpose or better impact over time? 

  

00:14:35:04 - 00:15:00:03 

Victoria 

Absolutely. So that's one of the things we focus on extensively in our business is trying to we refer to it as measuring what matters. And so we think of of lead indicators. So we can identify where, where our business is actually, you know, meeting people's needs or improving their life in some way. And that so there we we don't want to find out later on that you haven't been getting it right. 

  

00:15:00:03 - 00:15:19:22 

Victoria 

So we're looking at how do you identify a couple of things that are meaningful to to measure measure them over time, be very transparent whether they're improving or not. And if they're not improving, work out why and so that you can actually dig into it reasonably quickly. So in something like aged Care we think about quality of life. 

  

00:15:19:22 - 00:15:40:09 

Victoria 

And quality of life has a lot of factors that go into it. So there we think about things like is the food good quality? Obviously quality of care is is a non-negotiable. And we need people to get absolutely the top standard of care. But also what is the what is the built environment like for for the residents? Is it easy to operate for staff as well? 

  

00:15:40:14 - 00:16:02:12 

Victoria 

Can can you give people a really good experience of living in aged care? And those things all lead through to quality of life. And so where we find ourselves different than perhaps a for profit is we made a concerted effort to focus on quality of the food, for example, where an A for profit might be thinking about how do I save money on food? 

  

00:16:02:12 - 00:16:26:07 

Victoria 

We're thinking about how do we make our residents more satisfied by the food that we're giving them. And that has led to really, really good outcomes in terms of measuring food satisfaction. So we have a survey survey in every dining room that people can click. Did they enjoy the meal or not? And those numbers have really improved over time, which is really great. 

  

00:16:26:07 - 00:16:31:09 

Victoria 

And that's also led to less unplanned weight loss, which is a really good health measure. 

  

00:16:31:10 - 00:16:43:12 

Phil 

Fantastic. But maybe when you're advising clients who are going down this path, are you talking about impact and measurement of impact as part of that journey? 

  

00:16:43:14 - 00:17:07:18 

Elizabeth 

I am, yeah. And like it really does come back to the purpose. And I think that from my perspective, the impact and the way impact is being measured is coming back to why were we doing this in the first place and making sure there's real alignment with what was the motivation? Have we got the motivation right? And then is that actually going to be achieved those outcomes. 

  

00:17:07:19 - 00:17:16:02 

Phil 

Yeah, yeah. And do you get a sense of the success of mergers from that from that. 

  

00:17:16:04 - 00:17:40:20 

Victoria 

Look, I think we would say we've been very successful in the aged care space. That's gone really well for us. We've also had good success in the education space where we diversified into a different geography, which was to for us to to expand our revenue sources because we were very dependent upon government funding in one state. So, so that expansion has gone very well. 

  

00:17:40:24 - 00:18:13:01 

Victoria 

So now we've got diversified revenue sources, but I have seen situations where it hasn't gone well, where you end up effectively trying to squash to businesses together without a clear strategic rationale for for putting them together. And you just end up operating two businesses that you know are not in any way improved by by operating together. So I think it's something to be done cautiously and really making sure that the merger does align with strategy. 

  

00:18:13:02 - 00:18:40:12 

Phil 

You talked earlier about various things that happen along the journey, which means that the journey can be a lot more time consuming. You would have liked. What are the sorts of tips for how do directors make sure they fulfil their overarching responsibilities, while still trying to get this merger happening? Are they setting up separate committees to help this work? 

  

00:18:40:12 - 00:18:45:03 

Phil 

Well, what are sort of some of the nuts and bolts that you've seen organisations doing? 

  

00:18:45:04 - 00:19:10:00 

Elizabeth 

It's a really great question, and I see it done so many different ways because fundamentally, as you've said, at the end of the day, the directors need to be comfortable that what they're doing, what they're getting themselves into is they can do that and satisfy their directors duties, and it's furthering the purpose of the organisation. So and some of this will come back to the the delegations already in place within the organisation. 

  

00:19:10:00 - 00:19:37:17 

Elizabeth 

How much management are going to be driving things, making sure there's those clear points coming up to the board for those key decisions at different time frames. I've worked with some clients who the board want to be incredibly hands on, and everything really is run by them, and that works for some organisations. But it does often mean, depending on the timing of your board meetings, things are taking a lot longer in the time frame. 

  

00:19:37:18 - 00:19:41:10 

Elizabeth 

Other times, management are empowered and you're going up to the board for those key decisions. 

  

00:19:41:11 - 00:20:00:10 

Phil 

I'm glad you mentioned delegations because I'm mindful for the executive and management team, this can be really time consuming as well, right? So making sure they're not taking their I completely off what they're meant to be doing while this merger process is happening, which may or may not end in a merger anyway. 

  

00:20:00:12 - 00:20:23:19 

Elizabeth 

Yeah. Like it's a really big endeavour and it's a long and timely and often costly endeavour. And it's that tension. Like people still have their day jobs to do. And I work with clients as well of, well, we want to engage external advisors, but we want to keep costs down and we want to do things ourselves. But then that's taking time away from people. 

  

00:20:23:21 - 00:20:44:07 

Victoria 

Distractions are real. It can be a real problem because you can see sometimes somebody who will be going through a merger or an acquisition, and the management gets so distracted that the business loses value. So it makes it quite challenging because their, you know, their day to day job is isn't able to be done at the same time. 

  

00:20:44:12 - 00:21:11:24 

Victoria 

But I do think it's critical to reach in principle agreement early so that at least you've got two boards that are on the same page. So whether that's through a non-binding indicative offer or a term sheet, something that puts the key terms on on the table and works out if they're if there are no go points early on, because if there are, then you might as well walk away early rather than spending a lot of money and time and management distraction on something that might never be successful. 

  

00:21:11:24 - 00:21:37:11 

Victoria 

So if people have got real non-negotiables, it's important to understand that only on. And sometimes we see it, that there may be directors or management that are self-interested, and they they'll only go ahead if they end up the CEO, or they'll only go ahead if I still get to be the chair. And if that if you're never going to reach agreement on things like that, it's good to know early on and then it's probably not going to happen. 

  

00:21:37:12 - 00:22:00:24 

Phil 

Absolutely. We are going to do a subsequent episode on mergers and investigate some of those issues in some more depth. But Elizabeth, have you seen times when maybe the board isn't as one in terms of deciding a merger is a good thing or not a good thing to happen? 

  

00:22:01:01 - 00:22:36:10 

Elizabeth 

I have for a variety of reasons, but that key piece around the transitional governance and what the future board will look like can often be a really big consideration. You've got people on boards of both organisations who are generally there because they really believe in the organisation and what it's doing and have committed a huge amount of time, often volunteer time, to be on those boards and then talking about a scenario where you may or may not get to see the future organisation. 

  

00:22:36:12 - 00:22:52:12 

Elizabeth 

It's a big discussion to have. And where I've seen things not be so successful, is that where that governance piece and that future planning hasn't been discussed upfront, like Tory said? 

  

00:22:52:14 - 00:23:15:19 

Victoria 

Yeah, absolutely. I would agree, and many years ago, but I was working on the merger of of two superannuation businesses and effectively one of the businesses hadn't identified that, that some of the synergies were actually going to be the people who are going to go from one from two CEOs to one. You're going to go from two CFOs to one. 

  

00:23:15:20 - 00:23:37:00 

Victoria 

And as that came out, I think that was a bit of a shock to some people. So understanding that from the beginning is is important. And I think people have to put aside their own personal ambition sometimes, particularly in the, in the case of a charity or not for profit and say, well, what is actually best for the business here and not maybe not everybody's going to be on the same page about that. 

  

00:23:37:00 - 00:23:41:17 

Victoria 

But but it does need to be decided pretty early on. 

  

00:23:41:19 - 00:24:08:09 

Phil 

We are in Australia with six states and two territories, which means we've got in the four purpose sector, a lot of federated structures, and from time to time many of them consider coming together as a unitary structure. I was on the board at Alzheimer's Act at one point, and we went through that discussion. Eventually, out of all of that came Dementia Australia. 

  

00:24:08:11 - 00:24:19:10 

Phil 

What are you both seeing in this federated models where conversations might be happening around around mergers? 

  

00:24:19:12 - 00:24:47:10 

Elizabeth 

I'm seeing definitely conversations and it's really interesting. Sometimes they don't get past the conversation phase, but it's certainly something I'm seeing different federated structures thinking about. I think we're a huge country, and often what I see is the different entities operating in different states and territories have really unique, wonderful things that are how they're serving the people in the particular state. 

  

00:24:47:14 - 00:25:14:19 

Elizabeth 

And a lot of that broader governance around if we come together, what does that mean? That's a really key piece. Any merger and acquisition, you've got to think about that structuring piece of is it a business or an asset acquisition? Is it a share transfer, often a membership transfer. If you've got companies limited by guarantee in when you're thinking and dealing with federated structures, it's do you set up a brand new entity and tip everything into that entity? 

  

00:25:14:20 - 00:25:43:23 

Elizabeth 

Do you have one existing state that's much bigger than all the others? D'you tip everything into that? What does that mean in terms of is that state then kind of supreme and black has stronger leadership in one way. It's it's the, the politics of how do you do this. Well, so those local voices are still heard, people are still supported, but you're actually getting all those synergies and that greater platform from the unified structure. 

  

00:25:43:24 - 00:25:48:21 

Phil 

Because I love hearing that comment of but we're different here. Yes. 

  

00:25:48:21 - 00:25:49:10 

Victoria 

Yeah. 

  

00:25:49:10 - 00:25:51:14 

Phil 

Yeah. You hear that. You would have heard that a lot. 

  

00:25:51:15 - 00:26:12:08 

Victoria 

The cultural piece is important. But I just think very clear governance structures. So who's going to make which decisions and what level do you keep boards at each of the state levels. Maybe you do. But then there's an overarching board for everybody. What are you trying to achieve by by bringing together as as a federation, where are you going to get your uplift. 

  

00:26:12:08 - 00:26:38:00 

Victoria 

And that can be through learnings from each other. Are you going to combine systems? Are you going to combine boards? Those sorts of considerations really need to come into account. But I've seen it work well a few times as well, and particularly in some of the church groups, they've managed to get that quite, quite well done. And where the cultures are similar and the overarching purpose is similar, that it works better, I think than than bringing it together for the sake of it. 

  

00:26:38:01 - 00:26:54:24 

Elizabeth 

And I think those no go, no those go no go points are really important in that to and discussions I've had. It's around well like if someone decides they don't want to proceed, are the rest of us going to go ahead? Like what if it's not quite unified? Do the rest of you still want to go on the journey or not? 

  

00:26:55:00 - 00:26:56:15 

Elizabeth 

Which is an extra piece? 

  

00:26:56:17 - 00:27:24:07 

Phil 

Absolutely. And we've seen various examples of that over the years where not everyone has has come together. Right. We talked earlier about the financial challenges often being the focus for mergers. I'm assuming if you're going to go through a merger, you need to have your house reasonably well in order before you consider it. Any tips on how you do that? 

  

00:27:24:08 - 00:27:55:15 

Victoria 

Yeah, definitely. So we and we're actually doing this for a client in the disability services space at the moment. We think about merger readiness. And effectively you want all your information ready to show another another party. So all the questions that your advisors will ask whether it's legal, financial, you know, around the charitable purpose, you need all your documents in order and have have that their financials as well, but really making sure your management are ready to answer questions. 

  

00:27:55:19 - 00:28:20:06 

Victoria 

And because think in any merger you're both an acquirer and a target. So so you really need your house to be ready as well rather than just looking at the other side. So for me. Identify areas where there could be uplift in your own business. You know, identify where you say, okay, if we had better systems or processes, we could save money here. 

  

00:28:20:06 - 00:28:46:15 

Victoria 

If we had, if we had, I don't know, less, less premises, those sorts of things, you can identify opportunities that you could get through a merger. And then that means you can better identify the right target as well. And in disability services at the moment, it's obviously a very challenged industry. A lot of people are losing money and, you know, working through in investment portfolios that they've built up over over many years. 

  

00:28:46:15 - 00:29:11:13 

Victoria 

So whilst they may be solvent now, their runway for that is is challenging. But don't scale. Scale for scale sake is not is not necessarily the answer. You've got to find the right partner and and that means you've got to be got to be ready. And all the questions that you would want to know about a target or a merger partner, you need to know that about yourself as well, because they're going to be asking you. 

  

00:29:11:19 - 00:29:36:19 

Phil 

And Conder similar to that, while you know you can look at the audited accounts from the previous years and all of that due diligence, knowing that the outlook for some of those sectors is not great, right? Of how do you best prepare for that? Is there a way that you can be, you know, using industry stats at that sort of future? 

  

00:29:36:20 - 00:29:57:09 

Victoria 

Absolutely. For me, you should have your integration plan somewhat developed before you go ahead with with the merger. So you need to have identified those areas where you could have cost savings or efficiencies. And it's not just about people. It could be it could be systems. It could be that one business has a better version of a rostering system, for example. 

  

00:29:57:09 - 00:30:10:19 

Victoria 

And if that can be rolled out to the other one, maybe you can get some efficiencies there. So having an idea of what you're trying to integrate, how long it will take you and what financial upside there is from doing those things is really important. 

  

00:30:10:20 - 00:30:30:11 

Phil 

I thought, Elizabeth, we talked a little bit about some of the tax and legal and financial considerations. Any tips for directors who maybe not particularly experienced in that area, of what should they be considering before they're kicking off on these merger discussions. 

  

00:30:30:13 - 00:31:01:04 

Elizabeth 

Making sure you've got good advisors, I think, and making sure there's really clear parameters around what's going to be done internally and what's going to be done externally, and making sure that both management and the boards are empowered, that if they're worried about something, if something's not clear, speak up. And if you need extra advice, get that. I've dealt with boards where the target was definitely in financial distress, wasn't insolvent, but was heading in that direction. 

  

00:31:01:04 - 00:31:25:09 

Elizabeth 

And as a director, you've got your director's duties. If we think about the Act governance standards, it's not just about don't trade whilst insolvent, it's also about managing the financial affairs of the organisation responsibly. So working with the right people to get the information you need to make sure you can proceed with confidence is really key. 

  

00:31:25:10 - 00:32:03:00 

Phil 

Fantastic. I saw a stat a number of years ago now on the for profit sector, which kind of painted not a great picture out of merger activity, hadn't led to the financial benefits that many had expected. We're getting a sense in the for purpose sector on how successful mergers are, and perhaps as a follow on to that is, how early should you be looking at measuring that impact in over what period of time? 

  

00:32:03:02 - 00:32:24:19 

Victoria 

Oh, I think you should measure early and and often and see how how it is going. You should propose effectively a business case for the merger. And what are you trying to achieve. And then track yourself against it so that you can see whether or not you're the synergies you anticipated, the efficiencies that you were looking for, you know? 

  

00:32:24:20 - 00:32:48:10 

Victoria 

And if you're not, why not? And what can be done doesn't mean that it's off the table. It just might mean that you haven't done it as quickly as you might have liked, or you haven't been tough enough on, on on making hard decisions. And sometimes that happens. Are they always successful? Absolutely not. And I think we've seen situations where you just end up with two problems put together. 

  

00:32:48:10 - 00:33:12:04 

Victoria 

And that's not great. But in terms of tracking yourself against the business case, I think that's really important. Do we see successful ones? Yeah, absolutely. And there are you know, there is opportunity for larger not for profits to to come together and, you know, benefit their, their members and, and their ultimate clients. I see that as, as a possibility. 

  

00:33:12:04 - 00:33:34:03 

Victoria 

I don't have any statistics around how many are successful versus not, but I think if they're done well and with the right sort of thinking, which is not, you know, it needs to be commercial rigour at the same time as as that not for profit focus on the charitable purpose of the of the organisations. Bringing those two things together, I think is is really crucial. 

  

00:33:34:04 - 00:33:45:22 

Phil 

Fantastic. Victoria, Elizabeth, been lovely chatting to you today about mergers. We'll continue having this conversation as I know many in the NFP space are, but thanks for your time today. 

  

00:33:45:22 - 00:34:06:15 

Elizabeth 

Thank you. Thanks so much.