Greg Vickery AO, Special Counsel Norton Rose Fulbright Australia

Consolidation in the NFP Sector – WHY? Reasons Rising costs Economies of scale Stakeholder pressure

Three Scenarios a single legal entity with separate operating divisions in each State related parties with a common name but separate legal entities in each State unrelated parties with a common goals and/or a common name

Scenario 1 This was my Red Cross experience It was always a single legal entity formed under a Royal Charter with separate State & Territory Divisions, with their own Boards, Budgets, Staff and Strategies There was a weak federal coordinating body (funded by the States) which met twice a year

Issues Making the case for change Economies of scale Greater efficiencies Better sharing of resources Demands of donors and Government Better profile nationally Better monitoring of risk

Challenges Many members resistant to change for its own sake “States rights” arguments Asking States to surrender decision making and authority Rumour mongering Working to get a majority of support

How to progress Wide distribution of proposals Much consultation and willingness to vary proposals Compromise on minor issues Proposing a geo-functional national board Keeping State & Territory representatives Playing the “risk” card Moving in stages (Phase 1, Phase 2) and allowing members to get used to the changes

Scenario 2 Many national organisations are a combination of separate legal entities which work with a Federal or national coordinating body comprising State representatives, (usually the State Chairs and/or CEOs). Membership is State based.

Issues Similar to Scenario 1 but there are additional factors More due diligence on commonalities and differences State legislation and regulations need to be checked State funding and support must be verified Cultural fit Key question – What form should the amalgamated vehicle take?

Challenges Again similar to Scenario 1 but some new issues arise here Combating arguments of the “big State” takeover Identifying all costs and getting good tax advice Tailoring arguments to meet the different concerns of each State and Territory. What happens if all State bodies don’t come on board?

How to progress Again much time and planning is needed and each State body must be regularly consulted All major State stakeholders need to be identified and their issues addressed if possible Take as much time as is needed Identify benefits of working with a national structure and have a truly national planning team Preserve some key State links (at least in the short term)

Other options Allowing some State bodies to “wait and see” Alternatively threatening to form a new branch in that State if the existing body declines to amalgate (a risky strategy) Looking at a division of power between identified Federal & State based issues (like Australia’s National Constitution) and keeping some State bodies in place

Scenario 3 Same issues as for scenarios 1 and 2 however the first step requires more due diligence and more preliminary discussions with senior people and key stakeholders of each entity Review areas where an amalgam would help with the increased size and influence and identify areas of concern and how best to deal with them. Look at the overall costs and how to fund it

Scenario 3… con’t There must be total honesty and openness here A through risk analysis must be done A strong proposal or case for change can then be developed Aim for flexibility in the proposal where you can Can some components be left behind or transferred to other organisations?

Challenges Ensuring the objectives are clear and the key drivers for each organisation are understood. Demonstrating it is a genuine amalgamation and not a “take over” or an “ego trip” for the proponents Constant and appropriate communication Be wary of rumour mongering (especially in the social media)

How to progress Set up a national planning and implementation committee Prepare carefully, with exit strategies at each stage Take time Be patient Be flexible Get sound advice from lawyers and accountants and any funding bank

Common Issues to all 3 Scenarios Clarity of vision and purpose Leadership is essential (if leadership is unclear or fractured, the amalgamation will fail) Good use of communication with face to face meetings with key decision makers, wherever possible Keep talking to key stakeholders and ensure they know what is happening at all times so momentum is maintained

Common Issues to all 3 Scenarios...con’t Be clear on the benefits of the amalgamation (Why are we doing this? How will it improve things?) Don’t proceed if real doubt exists Don’t be bullied by obstinate minorities into making unnecessary changes Remain positive but realistic at all times Craft strong supporting messages post the amalgamation

Questions?