Jobs Education and Training

A case study of an asset transfer.  August 2010.

JET Derby took over a long established local Charity which had lost a significant contract with the City Council and the County Council to provide services for disaffected Youth. The Trustees of that Organisation, having made the decision to make the Charity dormant, looked for proposals from other Charities to resurrect the work. Subsequently three Charities were asked to present their case and JET was successful largely because of its specific experience in youth projects. JET was not able to renegotiate the Contracts but has significantly expanded its youth work in the last twelve months.

Both Organisations were Registered Charities with over 10 years’ history. Respective incomes at the height of their success were between £100,000 and £200,000. All provided services to a deprived inner city community of 30,000 people with over 100 nationalities living in a square area of 3.4 sq. kilometres. The move would reduce consolidated operating costs, avoid possible duplication of product offering and enhance sustainability. 

The Trustees of the Organisation with which JET combined through asset transfer, clearly believed that the Management at the time could not take the business forward. It was therefore an internal decision based on the likelihood of the Charity being able to access ongoing funding (and there was minimal trading income).

All Trustees of the failing Charity resigned. The Chair was to be appointed to the Board of JET to ensure that the specific work would receive due focus and attention. The senior staff member (Project Manager) from the failing charity resigned and reapplied for a position at JET. All line functions were absorbed by experienced JET personnel. No new legal entity was established although the name of the absorbed Charity was maintained as a project description.  
There was a formal proposal, prepared by JET and approved by the failing Charity's Trustees, which summarised the 'Rules of Engagement' and itemised how the work could be continued.

Once the asset transfer had been completed decisions were made by the two senior directors of JET in consultation with the remaining staff member of the absorbed Charity. Ultimate responsibility lay with JET's Executive Director reporting to the JET Trustees. 

Key learning from Mr Peter Bartlett, Business Development Director, JET Derby

The mechanics of the collaboration (the move; the reorganisation of JET's office; the establishment of new job descriptions etc.) worked well enough. The problem (as always) was that there was a significant difference in the work ethic and the culture of the two organisations. This is not to say that either one was better. The reality is that you can only discover this fact once the courtship is over and the organisations have worked together for a while. 

The main challenge was to establish why long term and successful contracts had been terminated by the Councils and to find out where the work had been transferred. We talked to the appropriate Council Authorities but it became clear that there was no chance of renegotiating the prior contracts. However we concluded that not enough work was being done with disaffected youth in our area of benefit. We therefore started to accelerate funding applications for Youth Projects. Currently we are running four (with one, 'No Place to Go', funded by Derby City Council!). We have great hopes for two more! 

Two years prior to the collaboration our new partners had established a county wide network from which the exit and reorganisation costs were very expensive. The process of decline almost certainly started with flawed plans for enlargement (but the executives involved in those decisions had then moved on). We concluded that there probably were issues of non performance and that relationships between the Charity and the Councils had deteriorated. This kind of reality is often difficult to establish in the early stages of discussions and negotiations! 

We would have tried to do more detailed diligence but nobody ever wants to talk about failure....and if key staff members have left there are few options! We would have spent longer talking to the Project Manager but objective and accurate discussions are often difficult when understandable self protectionism is an issue. However we have no regrets....it was an exciting business adventure and it has had great indirect results! 

Top tips

• Always ensure that there is a degree of fit between the core competencies of the combining operations.
• As the driver always be clear of intentions right from the start, be explicit and do not vacillate.
• Ensure that you take good legal advice.
• Do not necessarily follow the text book.
• Be bold and do not despair.....initial failure to successfully embed the new business can transform into success in another way!