Due Diligence – what your academy or Multi Academy Trust should know

Featuring Sharon Austen | 3rd September, 2018

As the government favour the Multi Academy Trust (‘MAT’) model and are encouraging the conversion of schools and growth of successful MATs, ‘due diligence’ becomes an increasingly common and important subject to navigate – for the school considering conversion, the school considering joining a MAT and the MAT considering joiners.

Due Diligence image - Advisors sitting at a table

What is due diligence (‘DD’)?

This is a process of information and evidence gathering undertaken to ascertain whether a proposed acquisition/conversion is viable and in the best interest of the trust/school. The process seeks to provide clarity to the Board to enable an informed decision to be made. Due diligence procedures should be undertaken by both the converting, acquiring and joining school/Trust.

What will DD cover?

It is likely to delve into the following areas: 1) ethos and culture 2) educational performance 3) finance 4) estates and IT 5) HR 6) legal 7) governance and regulatory and 8) capacity to deal with expansion.

What Financial DD should be carried out?

Considering finance alone, key information to be reviewed includes:

  • Historic financial information
  • Future budgets (where key assumptions should be reviewed and challenged)
  • Cash flow forecasts
  • Financial commitments
  • Board minutes
  • Audit management letter feedback
  • Internal controls
  • Ofsted reports
  • Finance team structure and qualifications

For the acquiring MAT, financial considerations should include:

  • Whether any significant future capital expenditure will be required? i.e. are buildings in a state of disrepair?
  • What reserves the joining school has, if any?
  • Possible future commitments i.e. restructuring costs, legal cases etc

For the joiner, financial considerations should include:

  • What is the basis for central charging and how is this administered?
  • Treatment of reserves on joining the MAT?
  • How does the MAT operate financially? How will the school be represented? How much financial control will be relinquished? How will the school access funds?
  • What is the financial position of other schools in the MAT?

Who can perform DD? Can PKF Francis Clark help?

DD can be performed in-house or can be outsourced. While cheaper to retain this work in-house, there is a related time cost. External input will incur fees but is possibly more independent and informed. We can provide a range of different services from a full, detailed review and delivery of a formal document to the Board, to advice and assistance on specific or general areas.

Contact the specialist Academies and Education Accounting team in your nearest office to find out how our due diligence services could benefit your academy or multi-academy trust.

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