Due Diligence for Schools Joining a Multi Academy Trust – Part 3

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.


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.

If you would like to be kept up to date on more topics like this, sign up to receive our regular newsletter.

Due Diligence for Schools Joining a Multi Academy Trust – Part 2

In Part 1 we examined the purpose of due diligence when a school joins an academy trust. In this Part 2 we look at workforce aspects and financial due diligence.


Payroll costs typically account for 75-80% of a schools’ expenditure (DfE, 2013) so this is obviously an area to pay careful attention to. When a school joins a MAT, normally the MAT is the legal entity which will become the employer of the staff. In a community school, the existing employer will usually be the local authority and so the HR department of the authority will have a key role to play in providing information about the workforce and smoothing the transition. However, in voluntary aided schools it is usually the governing body that is the employer. Even in some maintained schools, the governing body may be the legal employer of certain staff (e.g. premises assistants, community workers, nursery staff). This is a trap to watch out for since it is the existing employer that has legal duties to comply with.

The new joiner school will want to understand what will happen to its staff when they join the group. Under the new structure, who will have the power to suspend staff, appoint performance management reviewers, undertake threshold assessment or exclude pupils?

The MAT, on the other hand, will be interested in the profile of the staff it will be taking on, and the associated payroll costs and liabilities. The transfer of teaching and support staff will be covered by the Transfer of Undertakings (Protection of Employment) Regulations 2006 (‘TUPE’) and the contractual terms of the Commercial Transfer Agreement (CTA). The practical effect of this is threefold:

  • The new employer inherits the contracts and payroll costs (including pension entitlements) of the staff who transfer; the ability to make changes to employment contracts or release staff is very limited and requires specialist advice.
  • The current employer and new employer need to inform staff and consult with them about the transfer arrangements – failure to do so can result in a financial penalty.
  • Any existing grievances or claims relating to the staff transfer to the new employer and become their problem to manage.

Remember that TUPE can also apply to staff employed by external contractors. So, if the joining school has a contract for maintenance or cleaning with an outside provider with staff who spend most of their time servicing that location, and the intention is that these functions will in future be performed in-house by the MAT, these staff may also end up transferring onto the MAT payroll as well.

Some key questions to probe:

  • Obtain an organisation chart and biographies of key staff. Check historical and projected headcount. Any recent changes of leadership or restructuring?
  • Details of all staff, including date of birth, age, date of starting employment, length of service, salary, benefits, notice period, pension details.
  • Are appropriate contracts in place for all staff? Arrange to review a sample. Any consultants or self-employed contractors who regularly provide services?
  • Have any verbal assurances or agreements been made with staff outside of their formal contract?
  • Are personnel records up to date and securely stored? Will they be handed over on the transfer date?
  • Are payroll records up to date and complete? Have all necessary deductions been made and accounted for to HMRC and others? Do the figures tally with the contractual entitlements?
  • What are the figures for staff turnover? Are there any pending disciplinary or grievance investigations? Have any staff been dismissed recently?
  • Details of sickness records, employees on maternity leave or secondment.
  • How will occupational health support be provided in future?
  • How will absence management be dealt with post-transfer?


Both the new joiner and the MAT will have a range of stakeholders whose views and attitudes can shape the future success of the integrated organisation. These will include parents and carers, pupils, former pupils, the staff, the local authority, external sponsors or foundations (such as the local diocese in the case of religious schools), local residents, local media, the Regional Schools Commissioner. It is important to map out these stakeholders, solicit their views and decide how best to consult with them and keep them informed about future plans. What are their hopes, fears and dreams for the future? A stakeholder communication plan should be drawn up. Digital communications and social media could play an important role in doing this cost-effectively. Surveys, press reports and Google searches may produce useful insights.


Financial due diligence should determine the current financial position, as well as identifying any support or training needed for managers going forward. New joiners will need to understand how the ‘top slice’ deduction to their school budget to pay for central support services will be applied and whether it represents value for money. Typical rates can vary from 3% to 5%, in some cases even 7%. Are the service levels to be expected from central support services in return for this deduction clearly documented?

Typical areas requiring examination will include:

  • Income/ Expenditure Budget reports and cashflow projections
  • Summary of month end bank and cash book position for current year and last two years, explanation of variances and major inflows/ outflows
  • Five-year financial forecast for the school. Are assumptions realistic? Particularly with respect to pupil numbers, which is ultimately the key financial driver.
  • Any negative balances, deficits or outstanding loans (e.g. for capital projects funded by local authority, Priority Schools Building Programme or Targeted Basic Need)?
  • Any grant funding with restrictive conditions or claw-back provisions (e.g. for sports facilities)?
  • Details of revenue generating activities – e.g. room or outdoor space hire, paid-for services.
  • Any significant debtor balances?
  • Any significant off balance sheet liabilities (e.g photocopier leases or vehicle leases)?
  • Any VAT or corporation tax issues?
  • Any pension fund deficit?
  • How is payroll currently organised? Do all staff have up to date contracts?
  • How is banking currently organised? Who are the signatories on accounts?
  • What are the financial controls and checks?
  • What are the main risks facing the organisation? Are these documented in a risk register?
  • Discussions with the relevant section of the Local Government Pension Scheme should take place early in the process to find out their methodology regarding transfer values, which will have an effect on future employer contribution rates.
  • What accounting systems and current reporting arrangements are in place?
  • The new joiner will be keen to see the last 3 years’ audited accounts for the MAT and the auditors’ management letters

The most common areas of fraud in academies identified by the National Audit Office (2015) were:

  • Inappropriate expenses claims or undocumented salary increases
  • Inappropriate or unauthorised purchases (e.g. luxury goods, alcohol, cars)
  • Non-compliance with procurement and tendering rules for major purchases or building projects
  • Related party transactions (i.e. buying from business connected with management or governors)

Next time –  In Part 3 of this post, we will look at commercial and asset-related issues of due diligence for schools joining an academy trust.

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.

If you would like to be kept up to date on more topics like this, then why not sign up to receive our regular newsletter.

Due Diligence for Schools Joining a Multi Academy Trust – Part 1

Due Diligence for Schools Joining a Multi Academy Trust

The Department for Education has signalled clearly that the future development of academies lies in the consolidation of more schools into multi-academy trusts (MATs). Primary schools, in particular, will be encouraged to join existing clusters and groups of schools. In future, we may see schools deciding to leave one MAT and join another, where the grass is greener – a bit like footballers at transfer season! The decision of a single school to join a MAT family of schools requires careful thought on both sides. For the new joiner school, (which could be a community school, a church school or a standalone converter academy), the headteacher and governors will need to be satisfied that the match is a good one, the cultures are aligned and that operating at scale will bring the expected benefits for pupils. Equally, the board of the MAT will need to be satisfied that the school they are ‘acquiring’ or partnering with will fit well with the aims and ethos of the group, will not create unmanageable risks or liabilities for the future, nor de-stabilise the group as a whole. Both partners in the relationship need to undertake some detective work and analysis before signing on the dotted line. The technical term for this exercise is ‘due diligence’.

In our work with academy converters and MATs, we often find due diligence is often not given the priority and resources it deserves. In the wider corporate sector, research has found that 70% of mergers and acquisitions fail to deliver the expected benefits (IoD, 2012). The reasons most often cited for failure are (1) misguided strategy in pursuing the merger (e.g. ‘empire building’ or hubris) (2) overly optimistic expectations and (3) failure to manage the integration process properly. It is important that leaders of both parties spend quality time on this aspect to discharge their duty to promote their organisation’s best interests and enhance the chances of success.

Purpose of due diligence

Due diligence is the process by which the parties gather information about each other to ensure the integration process proceeds smoothly. In particular, it is used to identify risks, liabilities, cultural differences and practical issues that may cause difficulties later. The key objectives are:

  • To test the strategic rationale for the tie-up: will it improve the life chances and attainment of pupils and is it really financially and operationally attractive for both sides? What are the prospects for the future? Do the partners have the capacity and capabilities to pull it off?
  • To inform negotiations, identify liabilities and make sure the legal documents pick up risks and allocate them appropriately by using warranties and indemnities (legal clauses which require one party to compensate the other if a risk materialises and costs are thereby incurred). The general rule is that liabilities whose origin is pre-transfer belong to the transferor (local authority and/or diocesan trustees), and those whose origin is post transfer belong to the transferee (the MAT).
  • To lay the foundations of the future integrated organisation and build its culture. The process should combine an ‘outside in’ approach with an ‘inside out’ approach to understand the schools’ relative position in the local education system, as well as understanding the internal capabilities, strengths and weaknesses.
  • To examine broader issues of culture, systems and processes, management structures, future opportunities and business plans.

Is there a framework for due diligence?

In our work with academies, we are often asked about the best way to approach due diligence when a new school is joining a MAT. Effective due diligence needs to look at a range of factors to form a complete picture. It is not just about examining the accounts of the organisation, reading the last OFSTED report or even reviewing the staff list. Ideally, it requires a project team of people with different perspectives to pick up both hard and soft issues, the nuances vital to successful integration. Much of the information will come from interviews with open ended questions. As a mentor of mine once said: “Ask the question. Shut up. Listen”. Using two interviewers, one to listen and the other to observe body language can be useful. This is our suggested roadmap for success.


Start with ‘Why?’ For the new joiner, what is in it for you by joining a larger group? Have you clearly articulated the list of benefits you expect to get out of the ‘merger’ and communicated these explicitly to your prospective partners (for example, more funding and resources, enhanced resilience, better support services, staff training, enhanced career opportunities)? Are they documented somewhere so you can monitor progress and hold your partner to account later? For the acquiring MAT, is it part of your strategy to grow by acquiring new schools? Do you genuinely have the capacity, resources and support systems to absorb and nurture the staff team, pupils, buildings, contracts and liabilities you will be taking on?

What does this particular school bring to the party, as compared to others you could work with? Benefits for the MAT might include, securing your future enrolments, access to more funding, spreading overheads to achieve economies of scale, better preparation of pupils for secondary school life, enhanced opportunities for income generation. Have you clearly communicated to the new joiner the ethos, culture and behaviours expected of those joining your MAT? Have they explicitly accepted them?


Both parties need to understand where the other currently stands at the moment in performance terms.

Key questions to consider might be:

  • What is the scope of educational activities? How has the organisation developed and what is the rate of expansion?
  • Is there a documented vision, mission, values, strategy and objectives? How are they performing against these at present?
  • What are the achievement levels of pupils – gain an overview of attendance, attainment and the progress of pupils within the schools
  • How is the learning rated for pupils with SEN, disabled, BME groups and looked after children?
  • How is the quality of teaching rated?
  • How is attainment and progress measured and rated?
  • Quality assurance – how well does the MAT know the performance and the strengths and weakness of its academies?
  • What are the procedures for challenging individual schools and identifying the support they need;
  • How coherent and adequate is the model for providing school improvement support – whether through MAT specialist staff, external consultants, academies in the group, other schools or a mix of these approaches?
  • What do the latest OFSTED reports say and are the areas identified for improvement and action being addressed?
  • For the MAT, what are the critical success factors and KPIs that you will use to measure performance of schools joining the group? Are these explicitly clear, (e.g. ‘all our schools are expected to be rated good or outstanding by OFSTED within 2 years of joining the MAT’)

Leadership & Governance

Leadership and governance will be critical to future success. How would you rate the quality of the MAT Board? Is there a good mix of skills and experience? Do trustees actively challenge and question the management team or do they rubber stamp decisions? Can you see the minutes of the MAT Board meetings and committees? Have any performance evaluations been carried out for the Board and can you see them?

What do the last two OFSTED reports say about leadership, management and quality of governance? What governance issues is the Board struggling with at present?

How will governance be organised after the transfer? What roles will the governors of the new joiner play after the transfer? Will any of them be invited to join the MAT board or will they function as a Local Governing Body with some delegated powers?

Review the proposed Scheme of Delegation – what functions will actually be devolved to the local governing body and which will be retained by the MAT? In what circumstances could the delegation be suspended?

Are role descriptions of the SMT, governors and key staff clearly documented so it is clear who is responsible for what?

Does the MAT have a full suite of up to date policies and procedures in place and how do they work in practice?

Can you be confident that the organisation has applied the highest standards of propriety and internal control to avoid reputational damage? Do they manage board members’ and the management team’s conflicts of interest properly and avoid ‘related-party transactions’ (e.g. awarding contracts to a relative’s business)? Consider reviewing the register of business interests and board minutes to check this. Are you satisfied that the organisation is transparent in all its dealings?

Next time – In Part 2 of this post, we will examine the workforce issues and financial aspects of due diligence.

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.

If you would like to be kept up to date on more topics like this, then why not sign up to receive our regular newsletter.