In Part 1 and Part 2 of this post on due diligence for schools joining a Multi Academy Trust, I examined the strategic, leadership, workforce and financial issues of due diligence when schools join a multi academy trust. In this final Part 3, we look at commercial and asset-related issues.
Commercial
How are support services organised at present in the school which is joining the Multi Academy Trust?
Will any existing contracts be taken over by the MAT or need re-organising e.g. catering, cleaning, statutory testing, property maintenance, photocopiers, transport and vehicles, IT, telecoms? You should obtain copies of and review any agreements with suppliers or service users.
Is the school part of a PFI agreement? If so, what are the terms of this, and can some of the liability and responsibility remain with the local authority? This can be an area of high risk on which professional advice will be needed.
Are there existing building projects, grant conditions, partnerships or collaborations with other schools or outside bodies in place which could be inherited by the MAT?
Does the school own any intellectual property rights (e.g. logos, copyright, design rights or trademarks, internet domain names) which need to be transferred over?
Any pending law suits, claims or complaints which could give rise to liabilities in the future e.g. disputes with suppliers, safeguarding issues, health and safety, data protection, equality and human rights commission, breach of public procurement/ tendering requirements?
What insurances are in place at present and would they cover any issues identified post-transfer (e.g. an employment claim)?
Any permits or licences that need to be replaced or put in place post-transfer (e.g. copyright licensing agency, music performance, event licences)?
The MAT will enter into a Commercial Transfer Agreement (CTA) with the current owner of assets and contract holder (usually the Local Authority or Voluntary Aided School Governing Body). It has become increasingly common for local authorities to demand a contribution to their legal costs of negotiating and concluding this agreement and the Lease of the site. Have you included this in your project budget and perhaps stipulated deadlines and conditions of your own in return for this payment?
Asset Condition
What state are the school buildings in? What kind of backlog maintenance liabilities are there, and what is the likelihood of significant capital expenditure in coming months and years, e.g. will heating systems, roof repairs, water tanks, windows need repairing? Can the current owner be persuaded to fund/ carry out any works pre-transfer?
Who owns the school buildings and surrounding land and will this be transferred cleanly and effectively to the MAT? Are there any outstanding statutory transfers between public bodies not fully completed? Is the title to the land correctly registered at HM Land Registry – if not, consider asking the existing owner to tidy this up pre-transfer to avoid delays or problems if the title deeds cannot be located.
Watch out for thorny issues such as shared use of outdoor space, part of the premises leased to an external organisation (such as a private nursery provider or leisure operator), accommodation provided to school staff, which may be subject to protected tenancies making it difficult to remove the occupier and possibly leading to a costly dispute.
Have there been any significant building works recently- were all necessary consents and approvals obtained for these (e.g. building regulations and planning). Did the contractor provide a warranty? Have solar panels been installed on the roof- if so, who owns them and what contracts were put in place at the time?
IT systems- evaluate the age and utility of the current systems -are they fit for purpose? What do managers and staff think of the current systems and support service?
Who owns the equipment? Are there third party software licences which may need to be renewed after the transfer?
Have data security issues been considered? How will legacy equipment be disposed of securely (no data back-up tapes or machines found in a skip!) What will happen to the joining school’s website post-transfer?
Final thoughts
Due diligence is a vital part of any acquisition or merger of schools into a MAT. Handled sensitively and proactively it can lay the foundations for creating genuine ‘marriage value’ by allowing each party to get to know each other, explore the respective strengths and weaknesses of the other and find real opportunities to improve the life chances and attainment of pupils across all the schools involved. Contrary to popular belief, it is not a rigid process designed to unearth ‘dealbreakers’. Neither is the process an exercise in box-ticking: it needs to be a dynamic and living one deploying a range of skills and a healthy dose of emotional intelligence. Addressing soft issues such as cultural compatibility and management succession can be just as important as hard issues, such as legal and financial aspects. Professional advice from advisers familiar with the sector can provide very valuable intelligence and support. Remember the maxim ‘due diligence is cheap, litigation is not’. Leaders need to be as sure as they can be before taking the plunge to merge their schools. As the old saying goes, ‘marry in haste, repent at leisure’.
Find out more about our Due Diligence Service here.
Mark Johnson is a highly experienced independent solicitor & chartered company secretary helping schools and academies with conversions, creation of MATs, legal and governance issues. We can help your academy to flourish. Find out more at elderflowerlegal.co.uk.
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