Mergers in the Charity Sector: The Key Issues to Consider

(First published in the Charity Times)

For years, the call for charities to merge has been a popular refrain, with many keen to streamline the sector and to remove the apparent duplication of effort.

Yet it is also well understood that people should not be deterred from setting up their own new charity, and that the independence of each single charity is something to be cherished. Personal motivations and passions have the power to drive innovation to cope with new needs, new technologies and new attitudes.

More recently, the pressures on charities have grown: consider the increasingly hostile financial environment in which charities compete for funding, the media’s increasing willingness to challenge charities, and a decline in the cash that individual donors and local authorities are able or willing to hand over to charities.

Some charities have had little option but to respond to these pressures by merging; in many instances, it has been a case of a more robust charity taking over others working in the same field. This can preserve some of that passion and spark that led to the creation of the charities in the first place; it can also ensure that vital local services are kept going, at least for a while.

In other cases, mergers play a more positive role. Last year I advised on the merger of two well-known charities, each of which had been pursuing its own approach to a particular health condition. What these charities had recognised was that, from the perspective of people living with that condition, the charities could deliver a more effective and wide-reaching service if they joined forces.

In any merger, there will inevitably be a painful process of shedding personnel, branding, identity and history. But what steps can merging charities take to protect what is of value? I have set out a few key pointers below:

1. Don’t rule out options too early – there are many types of collaboration, some of which are less risky and less expensive than a “full” merger.
2. Don’t expect to reach agreement on all points at the outset – it can take time for the parties to get comfortable enough with each other to make the sorts of concessions and compromises that may be needed.
3. Pay attention to your supporters – early and careful communication with members and donors can help them to see that the merger will help the cause they care about, and not to see it as a defeat.
4. Don’t underestimate the time and effort involved in a merger – consider appointing a facilitator or consultant to manage the process, and don’t set unrealistic target dates.
5. Look out for troublesome liabilities – deficits on final salary pension schemes have the capacity to scupper a merger, but early planning can resolve matters.
6. Trustees might not meet very frequently, so plan the process so that key decisions can be secured from the charities’ boards at the right moments.
7. Think about whether the merged charity should be led by trustees from each of the merging charities, but consider any differences in organisational culture that could cause difficulties.