Learning from Mergers - the case studies

Community Action
Southwark
London Borough of Southwark

Community Action Southwark (CAS) was created in April 2008

from the merger of Southwark Community Care Forum (SCCF)
and Southwark Action for Voluntary Organisations (SAVO).
SCCF was set up 20 years ago to provide support services to
health and social care organisations in Southwark, while SAVO
2005 was created 10 years ago with a broader remit, encompassing
Chairs start to the entire voluntary sector. SAVO functioned as the area’s
discuss merger
Organisations
Council for Voluntary Service (CVS), a role which has now been
scope out merger assumed by CAS.
by starting the
due diligence
process; ongoing Although the two organisations had a somewhat different focus, there was
negotiations considerable duplication of services between them. There was confusion
between boards among voluntary and community groups as to which support provider
they should use, with some organisations using both for different services.
2006 A desire to eliminate this duplication and improve support to frontline
Merger negotiations organisations was the key motivating factor for the decision to merge.
stall, local authority
steps in; merger is
agreed Prior to the merger, one of “There was a degree of duplication
the organisations had run into between the two organisations,
Merger financial difficulties and there was and also confusion on who’s leading
preparations: serious concern over its long-term on what.”
organisations sustainability. There was therefore Supporting People Manager,
undertake full
a financial incentive for this London Borough of Southwark
due diligence and
consultations organisation to merge with another
that was more financially sound. They were also engaged in an ongoing
legal dispute with a former member of staff. This had a negative impact on
the organisation’s reputation and they lost some of their trustees.
April 2008
Merger date The local authority, Southwark Council, supported and encouraged the
October 2009 merger throughout. They were keen to eliminate the duplication of services
Post-merger phase New chief officer and increase the efficiency of the organisations. They saw the merger
appointed as a necessary step towards achieving better value for the money they
invested in them. They also felt that a merger would be in the interests of
the voluntary sector, as it would eliminate confusion about where to turn
for support and provide a stronger, more coherent voice to the sector as
a whole. In the end, the possibility of losing Council funding came to be a
key driver of the merger.

Page 2
“They needed a firm
commissioning direction to
make it happen.”
Supporting People Manager,
London Borough of
Southwark
“They said if we could not
reach agreement they would
create a new organisation to
give funding to.”
Chair, Community Action
Southwark
“Some people lost out and
some people got promoted.
But I think this is normal
in any organisation – even
if the organisation didn’t
undergo merger but was just
restructuring this might have
happened.”
Chair, Community Action
Southwark
Learning from Mergers - the case studies
Community Action Southwark
The merger process
Prior to the merger, SCCF and SAVO cooperated on several projects
and frequently referred cases to each other when it was felt that one of
them had more expertise and ability to help. They also shared some of
their trustees. The idea to merge originated from one of the Chairs, who
remained closely involved and committed to see the process through.. The
Chair of the other organisation was also very supportive of the idea.
The two boards started to undergo a due diligence process, during which
the primary focus was on checking each other’s accounts and ensuring
that the process was open and transparent. This was undertaken at an
early stage in order to ameliorate concerns that one of the organisations
was financially unstable. Due to the complexity of some of the legal issues
and the worsening financial situation of this organisation, the process took
longer than expected.
Approximately one year after the two organisations started to discuss
merger, the negotiations stalled because the management could not agree
on a way forward. The local authority stepped in and worked with them to
create a vision for the new organisation, with clear specifications of what
the CVS they wanted to fund would look like.
The organisations conducted extensive consultations with staff, their
members and the wider community. It was clear that there was broad
support for the merger locally although there were a number of issues that
needed to be resolved, such as harmonising staff contracts and integrating
the missions of the two organisations. External consultants were brought in
to help with the latter.
Staff were kept informed and involved through a number of consultations
throughout the merger process. Although some were apprehensive about
organisational change, the rationale for undertaking the merger was
clear and they saw the benefits it would bring to their organisations. No
redundancies were made.
Primarily for legal reasons, it was decided that the legal form of the merger
would be that one organisation would be dissolved and transfer its assets
to the other one, which would change its name and amend its Constitution
and Articles of Association. This led to some people perceiving the merger
as a ‘takeover’, although the fears of identity loss were in part overcome by
the changed name and branding of the new organisation.
The two organisations were led by Interim Chief Executives prior to the
merger, with each understanding that their role was to see the merger
through. A new Chief Executive was appointed six months after the legal
merger took place, whose first task was to conduct a strategic review
and undertake organisational restructuring. The merger had left the
organisation with a very ‘flat’ structure, with a large number of senior
managers reporting to the Chief Executive. It was at this stage that some
redundancies had to be made, which understandably led to a degree of
discomfort among staff.

Page 3
“We were able to hit the
ground running really
quickly.”
Director of Operations
and ICT, Community Action
Southwark
“The administrative burden
has been reduced compared
to what the two previous
organisations were paying,
and we’ve been able to put
that into frontline services.”
Chief Executive, Community
Action Southwark
“It’s brought together a
coherent capacity-building
and community development
offer for the local area, and
it’s brought about a unified
voice for the sector.”
Chief Executive, Community
Action Southwark
Learning from Mergers - the case studies
Community Action Southwark
Success factors
One of the reasons for the success of the merger was the strong support
received from the local authority. They had a clear vision of what they
wanted and helped the organisations overcome some of the difficulties
they encountered. However, the Council also understood that stakeholders
themselves need to agree on their priorities.
Another key success factor for this merger was the existence of a shared
vision among the leaderships of the two organisations, combined with a
willingness to see the merger through to the end. The leadership provided
by key individuals was the driving force behind the process. In addition to
some of the trustees, the two Interim Chief Executives were also closely
involved and committed, and the knowledge that they would not be
competing to lead the new organisation helped move the negotiations
forward.
The two organisations continued to provide support services to frontline
organisations during the merger, and CAS was able to start delivering
immediately after it took place. A key reason for this was the seamless
integration of IT infrastructure and other internal systems, which meant
that the merger had a minimal impact on frontline organisations.
Benefits of merger
Two years into the life of the new organisation a range of benefits have
been realised. These are both internal, relating to increased efficiency, and
external, relating to improved partnership working and services to frontline
organisations.
Internally, the organisation has a clearer, more robust structure, and
resources have been redirected from back-office functions to frontline
services. Some administrative functions, such as HR, have been outsourced,
leading to further efficiencies. The larger organisation is also in a better
position to attract funding from non-statutory funders.
The relationship between CAS and its statutory funders has become more
strategic and business-like. From the point of view of the Primary Care
Trust and Council, the merger has made it easier to communicate with the
organisation and manage contractual arrangements.
CAS is also in a much better position to represent the voluntary sector
and raise its profile on a strategic level. Being a single organisation means
that they have “one stronger and clearer voice”, which is increasing the
influence of the sector as a whole. A new body, the Southwark Voice,
has been created to facilitate links between voluntary and community
organisations.
A related effect is that frontline organisations now recognise the need to
support their CVS and use it as a vehicle for representation, rather than
the previous situation in which they were unclear on the two organisations’

Page 4
“A larger staff team to interact
with and to tap into individual
skills means there are more
people one can approach to
get help and support.”
Director of Operations
and ICT, Community Action
Southwark
“There was a challenge
around integration of staff
teams from the different
organisations, and how
they would work together
effectively.”
Chief Executive, Community
Action Southwark
“People often see mergers
as simple solutions but the
devil is in the detail.”
Supporting People Manager,
London Borough of
Southwark
Learning from Mergers - the case studies
Community Action Southwark
roles and “just assumed they were there and that’s it”, as one stakeholder
explained.
Voluntary and community organisations have benefitted from the clarity
of having one single point of contact for support services, and are able to
focus on developing one strong relationship with CAS instead of the two
some of them had to manage previously.
It is also felt that the quality of services has improved, particularly with
regard to the organisation’s website and publications. The larger team also
means that staff members are able to draw on each other’s expertise and
share learning more effectively.
CAS has also undertaken several new initiatives, such as the Southwark
Forum, a new one-stop shop for voluntary organisations, with a number
of sub-groups in thematic areas (e.g. children’s services, health and social
care). They have also launched a new online platform, BaseCamp, which
enables voluntary sector groups to communicate with each other on a
range of locally relevant issues.
Challenges and drawbacks
One of the main challenges the organisations faced during the merger
process was the large difference between the organisations’ financial
situations. These frequently proved to be a stumbling block during the
negotiations, as the other organisation was keen to avoid being dragged
into a financially unfavourable position. In the end, it was the Council’s
intervention that helped overcome this challenge. Stakeholders admitted
that they underestimated the amount of resources, in terms of both time
and costs, which it took to implement the merger.
During the consultation phase, a small number of frontline organisations
expressed concern that the merger might lead to a loss of specialised
support and the expert knowledge the two organisations had accumulated.
Additionally, one of the organisations involved in the merger had been
perceived by some frontline organisations as being ‘too close to the
council’ and not entirely independent from it. As such, it was feared by
some that a merger would lead to a loss of independence of the local
voluntary sector. There is no evidence to suggest that this happened,
but a limited number of local voluntary sector organisations had become
alienated from the CVS as a result.
Following the merger, the most important challenge was to integrate
the two staff teams. Most people met for the first time after the merger
had taken place and had a difficult time forming one strong team. With
hindsight, stakeholders felt that it would have been better to establish
work relations prior to the merger. It would also have been useful to put
more work into developing the organisational structure.
 Learning from Mergers - the case studies
Page 5 Community Action Southwark
Lessons Learned
• Support from key funders is important to ensure buy-in from the diverse range of stakeholders involved
• Committed and passionate leadership is a key success factor
• The lack of competition on the part of the Interim Chief Executives for the position of the new organisation’s
Chief Executive made the process easier
• Integrating IT and other infrastructure prior to the merger enables a new organisation to start delivering right
away
• A larger CVS with a wide remit is better able to represent the views of the sector
• Do not underestimate the amount of resources a merger takes
• It is important to address organisational structure issues prior to a merger

For further information about this case study, please contact:

Chris Sanford, Chief Executive, Community Action Southwark

020 7703 2368, chris.sanford@casouthwark.org.uk