WA Charities Enter $20M Merger

Two Not for Profits in Western Australia, Ngala and Geraldton Regional Community Education Centre (GRC), are finalising a merger to create a $20 million organisation with 330 staff.

While both organisations provide support services to families and children, Ngala is the larger of the two and runs centres across the state. GRC is based in Geraldton and the midwest, and will operate under Ngala’s name when the merger takes place.

Ngala chief executive Ashley Reid told Pro Bono Australia News the two organisations had long discussed various forms of collaboration.  

“They were having conversations with us originally about the raising expectations around governance, policies and procedures, systems – a whole range of those kinds of issues,” Reid said.

“We were talking originally about potentially providing some support functions, and those conversations, overtime, matured into talking about a full organisational merger for the reasons [of] sustainability of services into the future.

“For relatively small organisations, the costs of compliance and the obligations of taxation to industrial relations to legal obligations, accreditation, licensing, all those things, rachet forever upwards. And for smaller organisations, and I think particularly for some of the regional providers, that just becomes a higher and higher cost and bar to meet.

“The motivation was around sustainability of services into the future, greater efficiency and effectiveness of how we operate back office and support functions.

“Rather than look at it from scale, we looked at it from the point of view that, combined, the two organisations would be able to continue to meet service needs in that region.”

On Monday The West Australian newspaper said the state’s Not for Profit sector faced a “funding crunch” that was forcing charities to consider merging or folding.

But Reid said the Ngala and GRC merger was “definitely not forced”.  

“It’s not in response to crisis or any issues about GRC’s continuation. I think the best time to have conversations about mergers is not when it’s at crisis. I think sometimes the conversations are left until very late in the piece and that can make it difficult from either side,” he said.

“GRC is both a well-managed and long-standing provider, and the conversations were happening at a point in time where there wasn’t pressure as far as external funding or whatever else. I think that’s the best time to have a conversation.

“I don’t think mergers should ever be forced. Just like in the corporate world we don’t expect mergers will be forced. They’re done for mutual benefit.”

He also said that mergers were not a cure-all solution for the sector.

“I don’t think mergers are the overall solution for funding restraint within the sector. I think it’s very dangerous to think the way we solve funding restraint is to have mergers happen,” he said.

“I think they have to happen between organisations that have good cultural alignment, they have common purpose and [are] very much based on a strong, trusted relationship.”

Reid said the long merger process, which is the first in the organisation’s 120 year history, would be finalised at “any minute”.

“We’re down to the really technical legal detail.This was new to us too, because obviously it was our first experience of organisational merger,” he said.

“One of the reasons why potentially these conversations are a bit fraught, because it’s all fine to talk about it in theory, about the potential strengths and benefits and the rest, but the actual mechanical, legal process is quite onerous, so you need to get good advice.

“We’ve had some great pro bono assistance from Squire Patton lawyers and from Deloitte, because the actual due diligence process is pretty heavy. It’s very financial around balance sheets and liabilities and obligations to staff and contracts and the rest.

“So when I say it’s almost about to happen, we’ve still got the final legal documentation around the business transfer deed… which actually provides the legal mechanism to merge the two organisations.

“We’re right at that stage where that’s being finalised, obviously it has to be done in a way that both boards are comfortable with, and once that’s signed then it officially happens. So we’re thinking that will be in the next few weeks.”