MERGER ACQUISITIONS WESLEY FAMILY SERVICES

MERGER ACQUISITIONS WESLEY FAMILY SERVICES

Hopes for our session anticipate the challenges of varying stakeholders gain awareness of key required due diligence and implementation activities determine your organization's position for merger or acquisition Assess readiness to actively pursue strategic alliances including merger draft a list of next steps to consider strategic alliances including merger

Large group exercise What are the basic tools that you use to determine where your organization is going?

Large group exercise What are the basic tools that you use to determine where your organization is going? Mission Let s look at a few examples Values Let s look at a few examples Strategic Plan Review some key categories

Large group exercise What are the things you don t want to lose by partnering?

What are the things you don t want to lose by partnering? For Wesley Spectrum 1. Mission voice 1. Equity---reputation, outcomes, number served 2. Sustainability For Family Services 1. Mission voice 2. Reputation in the community 3. Outcomes focus 4. Recently developed marketing campaign (new logo)

Large group exercise What are the things you want to gain by partnering?

Large group exercise What are the things you don t want to lose by partnering? Do More for More Children, Families, and Adults Be More Effective, Efficient and Sustainable Continue to Innovate in What We Do and How We Do It

What are trends nationally/regionally/locally? External

Certified Community Behavioral Health Center WS would not be considered as it stands today Move from fee for service to alternative pay arrangements Build a full array that would represent life span services model Autism Future Mission commitment to follow kids through early and later adulthood New revenue streams as IDD funding opens up for autism diagnosis Adult autism will include work and housing Value Based Contracting This will require addressing social determinants this is why the social service components of our books of business remain important Allegheny County Fully integrate social services and BH Complex, multi-system clients need full array FSWP 50% in Allegheny, not seen as larger player Region Grow regional footprint Would a merger capitalize on the intended trends?

What do you want in the first conversation? Senior Leaders Boards

What do you want in the first conversation? Senior Leaders Boards Wesley Spectrum Humility Mission passion Successful track record Dream About Added Value Appetite for partnerships Family Services Vision for growth Focus on quality Focus on innovation Compatibility of mission Ability to partner

Elephants on the first day Who is CEO? What are their goals? Are boards in position? Program closure? Loss of staff?...they don t need to be solved

Early consideration..is there added value? Community/those served added value proposition Staff added value proposition Growth added value proposition Financial added value proposition

What is in it for the community? Enhanced services more for more Financially stable organization to weather the storms of funding volatility Creative solutions to meet gaps Business as usual market leading quality while sustainable!!

What is in it for me? Career advancement opportunities, 1,000 positions Financially stable organization to weather the storms of funding volatility Increased buying power i.e. benefits, utilities Either unduplicated or very leveragable complement of services Innovative culture to better serve kids, adults and families Avoiding hostile takeover in the future Business as usual

Growth added value proposition Niche Market Transition Age Services Autism Expansion to Adult Autism Dual Dx Intellectual Disability-Autism Older Adult Services Expansion Geographic Expansion

Financial added value proposition Outpatient services decrease loss Decrease overhead Volume purchasing Larger voice with payers

Due Diligence If you re excited about why coming together is a good idea, due diligence is to determine if it is not a good idea!! http://www.nonprofitlawblog.com/mergers-due-diligence-items/ http://www.kedconsult.com/articles-resources/merger-checklist/

Top Categories for Due Diligence Review Anything that suggests we shouldn t merge? Phase I soft due diligence Programmatic Financial Board* Resource expertise to move through due diligence internally and externally Phase II hard due diligence Licenses and Payers Contractual Risk HR Quality/Risk/Compliance Facilities Strategic plan *sooner-better, humility/vision/leadership

Top Categories for Due Diligence Review Structures to do the lifting Boards M&A Committee from each board Steering Committee senior managers of each organization Facilitator 10 Working Committees staff from each organization Merger liaison one person to keep progress moving Project management competencies Virtual Document Room Legal Counsel

Barriers Transition of State Licenses Transition of Medicaid billing # s MCO credentialing Drove decision to phase in merger Subsidiaries retained for 12-18 mo. New entity with no subsidiaries

Merger Communications Timeline Supervisor Communications / Staff Letter/FAQ s Feb 17 Staff Communications Feb 21 Supervisor Communications / Consumer Letter/FAQ s Mar 3 FSWP/WS Board Meetings Final vote Mar 15 WFS Intranet Launch Mar 15 Mailing to Consumers Mar 17 Press Release Issued Mar 27 MERGER OFFICIAL JUL 1 February March.July Feb 15 FSWP/WS Board Meetings 2 nd vote Feb 20 All Supervisor s Conference Call Mar 10 Merger Newsletter with Staff Letter included Mar 17 Temporary Website Landing Page Launch Mar 17 Announcement of consumer letter mailing in Merger Newsletter Mar 30 Communications to all remaining Stakeholders Jul 6 Follow-up Mailing to Consumers

DIFFICULT DECISIONS Electronic System to integrate: Electronic Health Records General Ledger Human Resources Fundraising We both have ADP payroll Other Decisions: Retirement Third Party Administrator Health Insurance Broker and plan year Insurance Broker PTO/Vacation

Funding the Merger Approached 8 foundations Foundations organized 2 nd meetings Timing of grants challenging Built three merger budgets Anticipate 3.3 million in grants Built cash flow to schedule expenses

Next Steps Electronic Systems Work Processes pick best in breed Policy and Procedures Foundation proposals Merging committees Culture bringing staff together

2006 Merger Learnings Wesley Institute and Spectrum Services Keep focused on the prize -- mission advancement Something is not as it first appears Leadership Competency should be the highest priority First 12 months should be kept simple Measure impact/success Competent board leadership increases success Can t stop communicating Stay humble... And remember to serve

Process Summary Strategic Fit Value Due Diligence Phase I Phase II Decisions (legal) Timing

How did we do? Hopes for our session Anticipate the challenges of varying stakeholders Gain awareness of key required-due-diligenceand-implementation-activities Determine organization's position for merger or acquisition Assess readiness of organization to actively pursue strategic alliances including merger Draft a list of next steps to consider strategic alliances including merger

Doug Muetzel dmuetzel@wesleyspectrum.org Stephen Christian-Michaels christian-michaelss@fswp.org