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The creation of Ofcom, the Office of Communications, was a major challenge, demanding decisive leadership and well structured project management. There were, however, no clear measures put in place at the outset to monitor whether the merger was a success. Although data is limited, the NAO has carried out a preliminary assessment which indicates that the merger has delivered many of the benefits expected. Today’s report sets out the lessons from Ofcom’s creation for future mergers of similar bodies.

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The creation of Ofcom was funded by a loan from the Department of Trade and Industry of £56 million, but the full cost of the merger is at least £80 million. Policy makers who propose mergers should give serious consideration to these costs in assessing whether a merger will represent value for money. In the case of Ofcom, most of the objectives are being met. These comprise consumer benefits, savings achieved and positive impacts on stakeholder perception.

The government has proposed over 30 mergers in the fields of regulation, environment, education, police services, healthcare and criminal justice. It is therefore important that lessons from past mergers are gathered and disseminated. The report includes 14 specific recommendations for those leading mergers of regulatory agencies and potentially other public sector agencies. Those include identifying and clearly accounting for the transaction costs of the merger; developing a careful risk mitigation strategy covering finance and IT; and establishing an explicit programme to assist the integration of the cultures of previous bodies.

“Creating new organisations from mergers is fraught with difficulty and costs. The early evidence is that Ofcom’s creation has been successful.

“However, success in carrying out mergers is certainly not guaranteed. Given the large number of proposed mergers in the public sector, it is important that Government develops its expertise in managing mergers and its understanding of their costs and benefits.”

Sir John Bourn, head of the National Audit Office

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