Humanitarian consultancy to merge with Save the Children UK

26 March 2019 Consultancy.uk

Charity Save the Children UK has announced it will incorporate a former subsidiary charity into its main organisation, to help it become “financially sustainable”. The Humanitarian Leadership Academy is a charity which provides humanitarian consulting services to international partner organisations.

As the dismantling of the UK’s social security net continues to progress, charities have once more become integral to the provision of some of the most basic and essential services citizens rely upon to survive. While the importance of the third sector could be said to be more important than ever before, it has come under intense pressure as demand for its services rapidly rises amid declining funding to charities from the UK Government.

At the same time, a number of charities are encountering a crisis of confidence, and a major decline in public favourability, thanks to a raft of damaging scandals to have hit leading names such as Oxfam in the last few years. As a result, the sector is going through a period of significant change, dealing with varying levels of public trust, increased regulation and Brexit uncertainty, as well as the recent resignation of the Civil Society Minister.

Humanitarian consultancy to merge with Save the Children UK

The impact of this period of upheaval for charities was illustrated last year when global professional services firm PA Consulting was called in by Scope to help lead an organisational change programme, as part of a five-year strategy. The disability charity did not bring in the level of donations in the year of 2016/17 that it had planned for, leading to the sale of a number of its assets since.

Now, two charities have announced a merger, as a means of consolidating their services in a difficult period. Save the Children UK, a high-profile third sector player, has announced it has acquired The Humanitarian Leadership Academy, which provides humanitarian consultancy to international partner organisations. Set up in 2012, the Academy became a subsidiary organisation of Save the Children in 2015, working since to reach full independence again to reach more local partner organisations. However, due to financial and strategic considerations, they have decided to move closer to Save the Children.

According to a spokesperson from the Academy, the charity will benefit from being part of a bigger brand, having faced “turbulent times” of late. Speaking to CivilSociety.co.uk, the source confirmed fundraising had been difficult in recent times, while the entity is working to become more sustainable. The charity’s most recently reported income was £6.4 million.

The merger with Save the Children will subsequently enable the Academy to reach out to more people, and benefit directly from Save the Children’s fundraising capabilities. The merger will happen on 30 April 2019, with the charity retaining its offices, sitting within a Save the Children UK department, and keeping its own branding and identity. According to the Academy, no jobs will be lost as a result of this merger.

The spokesperson added, “In recent months the Academy and Save the Children entered into strategic discussions to understand what this would mean in practice for both organisations. There has been a lot to consider and we concluded that in these turbulent times, consolidation rather than separation was the best approach."

Humanitarian Leadership Academy Chief Executive Saba Al Mubaslat meanwhile stated, “The merger with Save the Children UK is the next phase in our journey. It secures our future, and will help us to gain strength, reach more people and save more lives.”

As mentioned, a growing number of charities have found the raising of funds increasingly difficult. In order to address this trend, the CEO of a fundraising consultancy recently warned the UK charity scene that it must better engage with storytelling if it is to boost stagnant levels of donations. Caroline Underwood, who heads Philanthropy Company, said the third sector would do well to spend more time considering how to make information better accessible to its major donors.

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8 tips for successfully buying or selling a distressed business

18 April 2019 Consultancy.uk

Embarking on the sale of a business is one of the most challenging experiences a management team can undertake. Even serial dealmakers acknowledge that the transaction process can be gruelling, exposing management to a level of scrutiny and challenge through due diligence that can be distinctly uncomfortable.

So, to embark on a sale process when a business is in distress is twice as challenging. While management is urgently trying to keep the business afloat, they are simultaneously required to prepare it for scrutiny by potential acquirers. Tim Wainwright, an experienced Transactions Partner with Eight Advisory, says that this dual requirement means sellers of distressed businesses must focus on presenting their business in a way that supports buyers in identifying value, whilst simultaneously being open about the causes of distress. 

According to Wainwright, sellers of distressed businesses should focus on eight key aspects to ensure they are as well prepared as possible:

  • Cash: In a distressed situation cash truly is king. Accurate forecasting and day-by-day cash balances are often required to ensure any buyer is confident that scarce cash reserves are under proper control. 
  • Equity story and turnaround plan: Any buyer is going to want to understand the proposed turnaround strategy: how is the business going to enact its recovery and what value can be created that means the distressed business is worth saving? Clear presentation of this strategy is essential.
  • The business model: Clear demonstration of how the business model generates cash is required, with analysis that shows how financial performance will respond to key changes – whether these are positive improvements (e.g., increases in revenue) or emerging risks that further damage the business.  Demonstrating the business is resilient enough to cope with these changes can go a long way to assuring investors there is a viable future.
  • Management team: As outlined above, this is a challenging process. The management team are in it together and need to be consistent in presenting the turnaround. Above all, the team needs to be open about the underlying causes that resulted in the distressed situation arising.  A defensive management team who fail to acknowledge root causes of distress are unlikely to resolve the situation.

8 tips for successfully buying or selling a distressed business

  • Financing: More than in any traditional transaction, distressed businesses need to understand the impact on working capital. The distressed situation frequently results in costs rising as credit insurance becomes more difficult to obtain or as customers and suppliers reduce credit. Understanding how these unwind will be important to the potential investors.
  • Employees: Any restructuring programme can be difficult for employees. Maintaining open communications and respecting the need for consultation is the basic requirement. In successful turnarounds, employees are often deeply engaged in designing and developing solutions. Demonstrating a supportive, flexible employee base can often support the sale process.
  • Structuring: Understanding how to structure the business for the proposed acquisition can add significant value. Where possible, asset sales may be preferred, enabling buyers to move forward with limited liabilities. However, impacts on customers, employees and other stakeholders need to be considered.
  • Off balance sheet assets: In the course of selling a distressed business, additional attention is often given to communicating the value of items that may not be fully valued in the financial statements. Brands, intellectual property and historic tax losses are all examples of items that may be of significant value to a purchaser. Highlighting these aspects can make an acquisition more appealing.

“These eight focus areas can help to sell a distressed business and are important in reaching a successful outcome, but it should be noted that it will remain a challenging process,” Wainwright explains. 

With recent studies indicating that the valuation of distressed business is trending north. With increased appetite from buyers who are accustomed to taking on these situations, it is likely that more distressed deals will be seen in the coming months. “Preparing management teams as best as possible for delivering these will be key to ensuring these businesses can pass on to new owners who can hopefully drive the restructuring required to see these succeed,” Wainwright added.