Academies & MAT’s - Mergers & Financial Due Diligence (FDD)

21 October 2016

As more schools look to collaborate and merge to form larger Multi Academy Trusts, a comprehensive FDD undertaking should be considered the first priority.  The heart of ‘good’ FDD is the provision of information that enables all parties to make an informed judgement as to the balance of risks and opportunities and the terms on which to proceed. 

In any FDD undertaking, it is important that you cover all material issues, looking beyond the obvious and investing the time to investigate properly in order to avoid unexpected issues later on.

What should be investigated?

  • Funding, income and expenditure profile over the past 3 years, including cash flow
  • Budget position for the past 3 years and any future changes that are known
  • Forecasts of predicted pupil numbers on roll; considering wider issues such as local housing developments
  • Scrutiny of all board meeting minutes from the past 3 years
  • Review of all legal contracts
  • Analysis on all HR contracts including any existing TUPE requirements and special conditions
  • Inspection of the physical assets of the Academy, such as the condition of buildings and facilities
  • Scrutiny of all legal documents, insurances, health & safety audits, audit outcomes, ‘near miss’ reports and potential liability claims
  • Review of internal processes and controls (does practice reflect policies)?
  • Liabilities and any restrictions
  • Skills profile of current staff and Trustees

Many schools work closely with others around them, leading to a temptation to conduct a simple ‘desk top’ review.  This is approach can lead to many pitfalls and is easy to get wrong.  The better the FDD process, the more successful any potential merger will be.  Have a timeline and state who is responsible for what – and consider appointing a lead person to co-ordinate all efforts, who will bring together all of the information and report to the Board.

MacIntyre Hudson’s Corporate Finance teams are experienced in the education sector, having undertaken considerable due diligence work of this nature over the past 10 years; initially in the realms of higher education establishments and subsequently with academies looking to merge into a new or larger MAT.  They can support you throughout the process with a comprehensive financial due diligence offering. 

For an informal discussion regarding our services and your needs, please contact Cameron Cook, Head of Transaction Services.

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