Academy trust mergers made simple

31 January 2018

It is clear that the direction of travel of education policy is for there to be bigger and stronger multi-academy trusts. It is inevitable, therefore, that we will be seeing more and more academy trust mergers.

The mechanism for the merger will, in all but exceptional cases, involve transferring the assets and liabilities from one academy trust to another. One key question is which academy trust should transfer its undertaking and which should continue to operate. The decision should be made on strategic grounds, and is often most appropriately made after the due diligence exercise. However, emotions and politics sometimes play a part.

We set out below an outline of the merger process and key considerations for ensuring a successful merger:

  • The overriding duty of an academy trust is to ensure that a proposed merger is in the best interests of your current and future pupils. This may be through gains from economies of scale and the benefits of school-to-school collaboration and support.

  • Preliminary discussions – once you have identified a prospective merger partner with whom you think you have a cultural and educational ‘fit’, it is advisable to enter into a Memorandum of Understanding with legally binding confidentiality provisions to establish the framework for the merger talks (such as putting in place a joint steering group and to agree costs sharing) and to ensure that any information shared is confidential.

  • A robust business case – a proposed merger constitutes a ‘significant change’ to an academy trust which requires a full business case to be made to and approved by the Regional Schools Commissioner (RSC). While not a legal requirement, the RSC expects academy trusts to have conducted a full consultation to ensure that the needs of pupils, staff and the wider community are met. A consultation can uncover information that may be crucial to a merger and should be taken seriously.

  • Due diligence - due diligence by both academy trusts on each other is crucial. Due diligence is primarily a practical exercise to assimilate information on each other (financial or otherwise) to establish there are no serious matters of concern which could undermine the success of the merger and that any potentially problematic issues are manageable. It is helpful for each academy trust to be frank about its strengths and weaknesses early on so time is not wasted later on. The parties should consider jointly instructing professional advisers as this can often be most efficient and cost effective.

Download the full report to find out which issues the due diligence process needs to assess.

Caraline Johnson
Head of Education, Bates Wells Braithwaite

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