Learning from Mergers - the case studies

Community and Voluntary

Service Cheshire East
East Cheshire

The unitary authority of Cheshire East was formed in April 2009.

It united the boroughs of Congleton, Crewe and Nantwich,
and Macclesfield, as well as the transfer of responsibilities from
the former Cheshire County Council. As this case study shows,
these boundary changes were the most significant factor in
November 2008 the creation of Community and Voluntary Service Cheshire
Start of discussions East (CVSCE).
Preparatory work
undertaken by
external consultants
January 2009 CVSCE was formed on 1 January 2010 following the merger of three
Boards agree in support organisations serving the three local authority areas that existed
principle to explore prior to the boundary changes. These were Congleton District Voluntary
collaboration; Action, Crewe & Nantwich Voluntary Action and Macclesfield & District
Working Group
set up
CVS.
Working group
starts, recommends Prior to the merger, the three charities cooperated in some areas of their
merger and initiates April 2009 work, such as funding advice and volunteering, but had no shared resources
due diligence Cheshire East or services. They were all part of the Cheshire East Congress, which aimed
process unitary authority to represent the views of voluntary and community groups and improve
formed
communication between them.

August 2009
Extraordinary
general meetings Motivations for merger
Merger
held, at which
preparations
members vote in The amalgamation of the three district councils into a single authority was the
undertaken by
favour of merger;
Planning Group primary factor that prompted the organisations to consider merger. There
Working Group
and overseen by
becomes Planning were indications that the new authority would not be willing to fund three
the shadow board; different support organisations in
Group; shadow
consultations with
board constituted the area, and that they would have “We saw this as an anticipatory
staff held
to compete for funds. A number of move, a preemptive move to
stakeholders described the decision improve the structure of support for
1 January 2010 to merge as a direct response to the voluntary organisations in advance
Post-merger phase Merger date boundary changes and the signals of us being forced to do so.”
sent from funding partners. Stakeholder

While the boundary changes were “From our perspective it was

the trigger for the idea to merge,
there were other motivating factors
behind the decision. The boards of
the organisations felt that bringing
their services together would bring
a number of benefits, including the
excellent news. We came together
as one organisation and it was really
welcomed that the CVS would do
likewise.”
Partnerships Manager, Cheshire
East Council
 Learning from Mergers - the case studies
Page 2 Community and Voluntary Service Cheshire East

elimination of service duplication and the creation of a larger and more

efficient CVS, which would cover the entire new borough.

It was also felt that a merger would enable the development of new services
and improve existing ones, resulting in better support for voluntary sector
organisations in the area. In addition, a larger organisation would be able
to raise the profile of the voluntary and community sector and represent it
more efficiently than three smaller ones.

The merger process

To start with, the organisations engaged an external consultant to review

the mission, objectives, strengths and weaknesses of each organisation,
and the advantages and disadvantages of a merger. The report, addressed
to the three boards of trustees, concluded that there were significant
opportunities for collaboration.

A Working Group was then formed with the three Chairs and two other
trustees from each organisation. They conducted a due diligence process
and produced a report setting out the organisational profiles of the CVSs
and the business case for merging them. The legal form that the merger
would take was decided early on: dissolution of the three charities and the
formation of a new organisation to which their assets and staff would be
transferred and which would be registered as both a charity and a limited
company.

The report was then sent out to the organisations’ memberships, without
the agreement of whom the merger would not be possible as they had to
vote in favour of dissolving the old charities.

The boards then called extraordinary general meetings at which the

proposal to merge was put forward. After all three memberships and all
three boards agreed, the Working Group constituted itself as a Planning
Group and assumed responsibility for executing the merger. The group met
every 2-3 weeks over the course of 12 months to discuss the range of issues
that needed to be resolved prior to the formal merger. The main issues
were around the financial positions and structures of each organisation,
the future roles of staff and the acting chief officers, the maintenance and
upkeep of the fixed assets (i.e. offices) of the charities, and the governance
structure of the new organisation.

The Planning Group also agreed a timetable for the merger and a structure
for the new board, which was to be composed of 15 trustees – five from
each of the three organisations’ boards – and govern the new CVS during
its first year of operation, after which the board would be elected by
members. The board functioned as an informal shadow board prior to the
merger, overseeing the processes of planning and execution.

Staff were kept informed of progress on the merger throughout the process.
Following advice from a personnel consultant, formal consultations with
staff were conducted, and the issues they raised were taken to the boards.
The issues raised were mainly related to the way the merger would affect

Page 3
“It was important that we
took that vision through all
the way.”
Chair, CVS Cheshire East
“They didn’t want to control
the merger process but very
much supported it.”
Former Chief Officer,
Congleton District
Voluntary Action (CDVA)
“The fact that [this individual]
was used to lead on the
merger, because she was sort
of independent and didn’t
have a personal interest –
I think that was probably
key to how the process was
managed so well.”
Partnerships Manager,
Cheshire East Council
“[The merger] has put us in
a very important position
as we are now the lead
infrastructure organisation in
the area.”
Chair, CVS Cheshire East
Learning from Mergers - the case studies
Community and Voluntary Service Cheshire East
them personally, but it was made clear from the start that they would be
transferred to the new organisation under Transfer of Undertakings [TUPE]
legislation and steps would not be taken without consulting them. All three
groups of staff eventually saw the benefits that the merger would bring.
Advice and support was also sought from the Charity Commission, NAVCA
and Volunteering England. The entire process of merger from conception
until completion took approximately 18 months.
Success factors
One of the key success factors for the merger was the creation of the
shadow board and the fact that its members were committed and patient.
It was their effective leadership that enabled a smooth transition to the
new organisational identity. They came up with a vision for CVS Cheshire
East, which guided the merger process.
The newly formed Cheshire East Council and the Primary Care Trust were
very supportive of the idea of merger and actively encouraged it. They
felt that it would be easier to work with one body and services would be
more consistent throughout the Cheshire East area. The knowledge that
key funders supported the merger was one of the factors contributing to
its success.
Negotiations relating to the new service level agreements, relationships
with partner organisations, and specific merger activities such as asset
transfer were led by one of the former chief officers, who was independent
of the merging organisations and had no ambition to become the chief
officer of the newly formed organisation. This went some way towards
avoiding a personality clash and provided stakeholders with a clear point
of contact on matters relating to the merger.
Benefits of merger
All the stakeholders interviewed agreed that, as only a year has passed
since the merger, it is still too early for the full benefits to be realised,
but were confident that these would be seen during the next 1-2 years.
Nevertheless, there are some benefits that are already being felt across
the organisation.
The key advantage of the new organisation compared to the legacy
organisations is that it has a stronger position as the single focal point for
voluntary and community organisations. The new CVS will now be better
able to represent the sector and facilitate its interaction with key local
partners, including the statutory bodies. The new organisation is respected
and supported by its funders and able to act as the ‘voice’ of voluntary
organisations in Cheshire East.
Frontline organisations also benefit in that CVSCE has brought together
experienced staff with diverse expertise, who are able to provide better
support services to the groups that need them.

Page 4
“We were able to build on
previous reputations and
strengthen these reputations
and we were able to hit
the ground running more
quickly than if it was a new
organisation.”
Stakeholder
“We did due diligence but
when we made it happen
problems appeared.”
Chair, CVS Cheshire East
“Organisationally, it’s got
to get its structure and
management arrangement
embedded in, which is always
a challenge.”
Partnerships Manager,
Cheshire East Council
Learning from Mergers - the case studies
Community and Voluntary Service Cheshire East
In the future the organisation expects to provide a wider range of services to
frontline organisations, and in particular make more use of online services
as more and more organisations in the area have online access. There are
plans to engage groups in a consultation process and encourage them to
uptake the CVS’ services. CVSCE’s volunteer centres will also refocus their
efforts and also try to attract different types of volunteers, who can offer
their professional skills and experience to local voluntary and community
groups.
CVSCE is currently undergoing a process of organisational restructuring,
which is expected to reduce overhead costs by up to £60,000 a year and
produce a 15% increase in efficiency. Resources will be shifted from back-
office functions to frontline services, bringing further benefits to frontline
organisations.
Challenges and drawbacks
At the start of the merger negotiations some trustees were concerned that
local, one-to-one support to groups would be lost following the merger.
Since one of the larger organisations had more funds to support the
merger, the other two felt somewhat threatened that they would lose their
influence. Concerns, especially about loss of local identity, were particularly
pronounced within one of the merging organisations.
However, the Working Group created a positive message and a vision for
the new organisation which persuaded the partners that there was more
to be gained from the merger than lost. Some member organisations were
concerned that frontline services might suffer from the merger, particularly
if the three local offices throughout Cheshire East were not retained.
These concerns were also addressed through the report produced by the
Working Group, and a decision was made that none of the local offices
would be closed.
Once the merger was agreed by the organisations’ memberships, there
were a number of legal and organisational issues that needed to be
resolved. The transfer of fixed assets (i.e. office buildings) caused significant
problems as two of the buildings were funded and partly owned by external
funders and contracts needed to be renegotiated. Other legal issues which
proved difficult and costly were related to IT and financial systems, such as
the need to close and re-open bank accounts and cancel the old and take
out a new insurance.
Another challenge for the shadow board was to decide on the process
of selecting a new chief officer and then to support the newly recruited
chief officer in a restructuring process to create a single Cheshire East wide
team. Staff contracts and HR policies needed to be harmonised, as there
were differences in remuneration, working conditions, etc. Getting the new
organisational structure right is one of the key challenges that still stands
before CVSCE. As one stakeholder admitted, it is “quite challenging to
unravel all this.”
 Learning from Mergers - the case studies
Page 5 Community and Voluntary Service Cheshire East

“A real challenge is the fact
that as a new organisation
you instantly inherit three
times the bill that you may
have had if you only had one
building.”
Stakeholder
The merger proved to be an expensive process, costing more than initially
expected: at least £45,000 has been spent to date. Significant items
include solicitors’ costs, specialised advice, IT, etc. This has meant that
the organisation has yet to see any financial benefit from the merger. The
challenge now is to balance the cost of providing support in a large area
with the cost of running three separate offices.
Stakeholders are aware that it will take time to realise financial efficiencies.
The expectation is that in the long term the new CVS will be able to do
more for the same amount of funding, rather than be able to reduce their
total requirement for funding.

There have also been drawbacks from the merger to some frontline groups.
Prior to the merger, one of the organisations had been stronger than the
other two and inevitably some support in the area where they operated
has been lost in order to enhance support in the other two areas. The
voluntary organisations within this area have thus been impacted negatively
in the immediate aftermath of the merger, although this is expected to be
neutralised in the future. There is now a more even level of support across
the local authority area.

Lessons Learned
• Strong and committed leadership provided by the shadow board was a key success factor
• Backing of local partners, including statutory funders also supported the process
• Regular communication with staff members and member organisations ensured that concerns were addressed
in a timely manner
• The merger demonstrated the power of a clear vision to aim for and a challenging timetable to make it
happen
• It is important not to underestimate the costs involved in a merger, in terms of both funds and time
• It is also important to spend enough time on working out how to amalgamate three different organisations
into one and make sure that staff work together in a coherent structure

For further information about this case study, please contact:

Caroline O’Brien, Chief Officer, CVS Cheshire East

01270 763100 / 01270 211545, caroline.obrien@cvsce.org