Mergers, acquisitions, amalgamations and their impact

A merger, acquisition, amalgamation or other similar change of control can result in a significant change for the organisations involved. Many or all aspects of governance, financial management and service delivery may be affected.

It may also affect your organisation’s contract with us, and eligibility to continue to receive funding. (The contract may be in the form of Funding Deed and Program Level Agreement, or a Human Services Agreement.)

This is why you’re required to notify us of a merger, acquisition, amalgamation or other similar change of control in your organisation.

We strongly recommend your organisation:

• notifies us and consults with us as far in advance as possible, so that you understand how the change of control may affect your contract with us
• obtains the necessary independent legal and business advice to ensure you understand how it may affect your organisation and its operations
• carries out the necessary due diligence before you make any legally binding commitments.

Clarification of the terminology

‘Merger’, ‘acquisition’ and ‘amalgamation’ are terms used to describe the transaction whereby two or more organisations combine their operations. However, they’re not legal terms with a precise or technical meaning. In fact, different people may use different terms to describe the same transaction.

Regardless of the term used, these transactions involve a change of control, which means a change in the direct or indirect beneficial ownership or control of an organisation.

Some examples of a change of control involving a merger, acquisition or amalgamation are:

1. Organisation A gains control of Organisation B, with the ability to decide the composition of its governing body and management, as well as shape its financial and operating policies.
2. Organisation A becomes the wholly owned subsidiary of Organisation B. Organisation A retains its governing body and continues to operate under the control of Organisation B. Organisation B may have a majority representation in the governing body of Organisation A.
3. Two or more organisations (A and B) join to form a new organisation (C) where the assets and liabilities, rights and obligations of Organisations A and B are then owned by Organisation C. Organisations A and B are dissolved or become dormant.
4. Organisation A transfers its operations, assets and liabilities, rights and obligations to Organisation B. Organisation B establishes a new identity with a new leadership team. Organisation A is dissolved or becomes dormant.
5. Organisation A takes ownership of the operations, assets and liabilities, rights and obligations of Organisation B. Organisation B is dissolved or becomes dormant.

Your obligations under the contract

To comply with the terms and conditions of your contract, you must notify us, in writing, of any change of control that materially affects your ability to provide the services you are contracted to deliver. (This is implied by clauses 3.3a and 3.4d of the Funding Deed, and stated in clause 8.1 of the Human Services Agreement – Standard Terms.)

This means you must notify us if your organisation is involved in a merger, acquisition, amalgamation or similar change of control (regardless of whether you’re Organisation A, B or C in the examples above).

The change of control may result in automatic termination of your contract. That’s why it’s important to obtain independent legal advice, carry out the necessary due diligence, and inform us of your intention in advance.