As featured in the latest edition of Club Insight Magazine
As the end of 2024 is fast approaching, it is a good time to reflect on the trends we are seeing throughout the clubs’ industry as it continues to grow and evolve. In particular, we have noticed a continued uptick in clubs:
- seeking out mergers and acquisitions with other clubs; and
- opting for alternative structures beyond that of an incorporated association.
This article takes a dive into these trends, providing insight into why this is occurring and the potential benefits for those in the industry.
Mergers & Acquisitions
It is our view that clubs are increasingly opting for mergers and acquisitions with other clubs as they seek out financial resilience, broader reach and increased market share, enhanced/expanded member services/offerings, and continued growth.
There are numerous benefits in this scenario for both the larger acquiring club and the smaller target club, such as:
- the bargaining power with suppliers is increased, such as for alcohol or food and/or the increased total sales and potential sales assist in achieving economies of scale, providing larger margins to bolster profits, assisting in financial resilience, passing on further discounts to members or increase member services/offerings;
- there is knowledge transfer between the parties, which can allow for further efficiencies and streamlining of business operations; and
- smaller clubs that rely largely on volunteers and who don’t have the skills and resources to manage or oversee a licensed club business can pass that responsibility over to a larger club and instead focus on their core sporting or community objectives.
Restructuring
There is also an ongoing trend of clubs transitioning from incorporated associations to companies limited by guarantee, which is being driven by the need for stronger governance/regulation to better facilitate growth/investment and a more modern/appropriate corporate structure.
There are numerous benefits for clubs considering this change, such as (this is not exhaustive):
- higher governance standards and more clearly defined responsibilities;
- a board of directors can appoint additional directors as opposed to committee members requiring election at a general meeting of its members;
- increased flexibility in the terms that can be included in a constitution;
- changes to a constitution can take effect immediately upon special resolution (as opposed to changes having to be approved by and registered with the Office of Fair Trading);
- a more professional perception of the club from third parties (for example, banks, authorities, insurers) and
- ability to operate anywhere in Australia without needing to set up an association in another state or becoming an “Australian Registered Body”.
An interesting insight is that a company limited by guarantee is traditionally subject to more onerous laws in relation to its management and governance which would typically be seen as a negative. However, the clubs coming to us often view this as a positive due to the increased accountability for directors attracting higher quality candidates who are more focused on governance.
Conclusion
If your club is considering a potential merger, acquisition or otherwise looking to restructure, it is strongly recommended you engage experienced professionals for trusted advice that is appropriate and tailored to the transaction, organisation and your needs.
Please don’t hesitate to contact me on 07 3224 0353 if I can assist you with this.
