Project case study:

Combining group companies

The challenge

Our client, a large regulated multi-site operations company, was for strategic reasons to be merged with a sister company that operated an additional large and very complex site within the group. The end goal was to have all of the sites and supporting operations housed in one legal entity rather than two, with a consolidated Board and Executive team structure in place together providing effective oversight over all operations. We were asked to advise on the options to achieve this combination, and then to coordinate the implementation of the transaction.

Our extensive mergers, acquisitions and reorganisations experience, combined with our corporate governance expertise and sector knowledge, meant that we were very well placed to support the client’s needs.

Our approach

The first step was to gain a good understanding of what was to be merged, so that we could advise on the most suitable transaction structure. We held briefings with key leaders and subject area specialists, supported by high level due diligence on key documents and registers. This initial review covered such areas as governance structures, physical assets, land and buildings, employees, key contracts, regulatory and environmental licences, intellectual property, funding, banking and insurance arrangements.

We also identified the key stakeholders in the transaction and considered their respective interests and sensitivities that needed to be considered in the transaction design.

We then prepared a report for the company Boards recommending the approach of a business and assets transfer from the one-site sister company to the multi-site client. This would achieve the goal of all relevant sites and their respective assets, contracts and employees being held in one company. Our report was supported by a detailed step plan setting out each stage of the transaction and what documents would be required to implement it.

The Boards supported the proposal on the rationale that it was more straightforward to move the assets, contracts and people of the smaller entity into the larger one, and no legal or regulatory obstacles to this approach had been identified.

Separately, we provided advice on the operation of the client’s corporate governance framework after the merger, including changes to the composition and scope of the client’s Board, certain Board Committees and Executive team to reflect the addition of the sister company’s complex and important site.

From our experience of group reorganisations, we were very mindful of the importance of clear and regular communication to impacted stakeholders to ensure they understood the aims, why the transaction structure had been chosen and what it would mean for them in practical terms. We therefore prepared and delivered briefings, especially for employees of the two merging companies, setting out the strategic rationale, the step plan and most importantly including a ‘calming’ message that normal every day operations at each site would continue unchanged, simply within a different legal entity ‘wrapper’ in the case of the sister company – i.e. the same people doing the same work under the same contracts at the same site. Regular reinforcement of this message helped build trust and a spirit of collaboration across the two merging companies.

Workstreams were then created, each composed of subject matter experts from both merging companies, with support in some cases from the shareholder. Each workstream was tasked with identifying everything in its scope that was to be transferred from the sister company to the client, to define all consents needed and to advance the process for preparing for the transfer. We played a key ‘hands-on’ role in coordinating and providing troubleshooting support to the workstreams, as well as reviewing the legal documents that would give effect to the business transfer. We reported regularly on the status of preparations and risk mitigations to a Board projects committee established to oversee the transaction.

When approaching the target date for the business transfer, we prepared a Board paper with proposed resolutions for all group companies involved, to approve the completion of the transaction. We also helped draft internal and external announcements and notifications to suppliers and partners.

The outcome

We helped foster and maintain a spirit of openness, collaboration and joint problem-solving throughout planning, preparation and disciplined execution. We, the client and the shareholder were delighted that this led to the transaction being successfully completed, precisely on schedule.