Transactions guidance

Periodically, Monitor produces information about specific aspects of transactions. We include this information in our regular FT bulletins and it is also available below. For our published mandatory and best practice guidance documents, please see the Useful publications page.

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  • Co-operation and Competition Panel (CCP)

    Their Terms of Authorisation require NHS foundation trusts to comply with the Principles and Rules for Cooperation and Competition (PRCC). It is Monitor’s duty to assess whether a transaction places a trust in breach of the PRCC.

    The Co-operation and Competition Panel (CCP) has reviewed a significant body of material concerning NHS community services, the operation of competition and choice in this sector and the potential financial and clinical impact of mergers involving community services. It has concluded that it is appropriate to limit the resource it allocates to new Transforming Community Services (TCS) merger cases, to allow it to focus its resources in a manner that is consistent with its prioritisation criteria. As such, the CCP has published a statement of prioritisation for TCS transactions.

    More information on the CCP can be found here.

  • Calculation of thresholds

    The Compliance Framework defines, in Appendix F, the thresholds to be used by foundation trusts to classify a transaction as “material” or “significant”, based on their scale relative to the foundation trust. The distinction between these two types of transactions determines the extent of additional reporting required by Monitor. Foundation trusts are required to apply three ratios: Assets, Income and Consideration to total NHS foundation trust capital. For example, a transaction where the income associated with the transaction is between 10% and 25% of the income of the NHS foundation trust, is classified as “material”.

    A number of foundation trusts have queried whether these ratios should be based on historic, current or future year figures. The general rules are:
    • For acquisitions and divestments of assets or businesses, data from the last year’s audited accounts should be used (as this is robust and the numerator and denominator are on a comparable basis).
    • For capital investments, the investment may be made over a number of years, with revenue attributable to the investment potentially only being achieved in future years. Here it is proposed that for the asset ratio, estimated capital spend will be compared with the audited asset values, and for income ratio the full year impact of projected revenue from the investment will be compared with projected foundation trust revenue in that year.

    In addition:
    • For any other transaction types, the data used for the transaction classification will be considered on a case by case basis. Foundation trusts should seek guidance from Monitor if there is any uncertainty.
    • Where there has been a material or significant transaction since the date of the last audited accounts, we will consider the data used for the transaction classification on a case by case basis.
    • In the case of an acquisition where there has been a material change in the financial position of either the foundation trust or the business being acquired since the last accounts date, and the ratio at that time is not considered representative of the contribution of the acquired business to the foundation trust, Monitor may, following discussions with the foundation trust, choose to recalculate the ratios on a pro-forma basis using current or future year data.
    • In all cases Monitor may, following discussions with the foundation trust, choose to recalculate the ratios using data from future years where we reasonably consider this to be an appropriate measure of the relative size of the transaction.

  • Investment adjustments

    Foundation trusts can apply for an investment adjustment. This applies where a foundation trust is making a major investment, including acquisitions or mergers, which may result in expenditure or dilution of income in the short term, with the anticipated delivery of longer term financial, strategic or service benefits. The aim of this is to ensure that the financial risk ratings do not disincentivise longer term investment for the benefit of patients.

    For further information on investment adjustments, click here.

  • Using independent accountants

    Under our Compliance Framework, independent accountants may be required to perform a range of services in relation to transactions, including reporting on post transaction integration (PTI) plans, working capital board memorandums and financial reporting procedure board memorandums. Some accounting firms have expressed concern over potential conflicts of interest if they are already contracted to complete work for a foundation trust so we have produced the following guidelines:

    • Where an accounting firm is undertaking due diligence work on a foundation trust applicant, we would consider it a conflict for that firm to undertake a material piece of work for that trust in relation to a transaction. 
    • We consider that no conflict arises where an accounting firm acts as both an adviser to the foundation trust and the independent reporting accountant on a significant transaction.
    • Where an accounting firm is also the foundation trust’s external auditor, the trust’s attention is drawn to section 2.12 of the Audit Code for NHS Foundation Trusts which states that “the auditor may, with the approval of the board of governors, provide the NHS foundation trust with services that are outside the scope of the audit as defined in the code (additional services). The trust shall adopt and implement a policy for considering and approving any additional services to be provided by the auditor.”
    • Where an accounting firm has an internal audit role at a trust, we consider that it should not act as the independent reporting accountant on a significant transaction.

    Potential conflicts of interest are ultimately an issue for contracting foundation trusts to manage jointly with their appointed independent accountants. Monitor should be consulted where foundation trusts and their independent accountants consider that it would nevertheless be appropriate for the independent accountant to perform the services contrary to the relevant guidelines set out above.

  • Timeframes

    Trusts should consider the timeframes involved in Monitor reviewing major investments to ensure they incorporate these into their transaction planning.
    Review timeframes:

    • Material investments – one month
    • Significant capital investments – 6 to 8 weeks
    • Tier 2 extensions – 6 to 8 weeks
    • Significant acquisitions – 2 to 3 months

    It is worth noting that these are minimum review periods and if we identify any issues, the time required will increase. 

    An NHS foundation trust is required to receive formal notification from Monitor that it has complied with the requirements of the Compliance Framework before entering into a legally binding agreement with regard to a major investment.

  • Financial models

    For significant transactions and Tier 2 requests Monitor will require the NHS foundation trust to submit a Long-Term Financial Model. This model can be obtained by emailing

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