Charity mergers – time to consider the future?

As charities continue to work on their own recovery post Covid, their trustees will certainly be considering the future.  Charity mergers isn’t a new concept and could be an option for trustees to consider, to help provide a strong future and to enable the charity to continue to best achieve their charitable purpose.

Whilst many in the charity sector may see a merger as a sign an organisation has somehow ‘failed’, it is important to remember that outside of the charity world, mergers are common and a tool to combine the strengths and resources of organisations to allow them to grow and prosper.

A charity merger could take a number of forms which includes an agreement to work more closely and collaboratively to deliver services, the asset transfer from one charity to another or the creation of a new charity from the merger of two or more organisations.

Whatever the structure it is important to consider those affected by it – the employees, volunteers, donors and the beneficiaries of the charity’s services.  A successful charity merger is one that brings all of these individuals together to create a new, more effective and efficient way of working.

Legal considerations to take into account will centre around the legal structure which could take a number of forms:

• A straightforward merger of two or more equal organisations who will work together as equals.
• A takeover, where one or more charity is transferring its assets, activities, employees etc to another.
• A group of charities, where one charity becomes a subsidiary of another larger group.

There are a number of important considerations with any form of merger to succeed which include:

• The merger must be in the best interests of the charity and its beneficiaries.
• Being open about everything and viewing a potential merger as a strategic opportunity for the charity to grow and deliver better services.
• Don’t consider the charity to have ‘failed’ because it is exploring or pursuing a merger.
• Make sure the charities are compatible by carrying out due diligence on both the financials and the history, culture and ethos of the other charity.
• There will be costs associated with a merger, so it is important to budget for these to enable the process to complete.
• Be realistic that it will take time and a considerable amount of work to embed new team structures, adjust to the new ways of working and to overcome differences in work culture.
• Speak to the Charity Commission if you need any advice to enable you to change or broaden your objects.  They have been encouraging charities to consider mergers to build stronger and more strategically focussed organisations.
• Don’t be afraid to seek the advice of business professionals who might be willing to volunteer their time or mentor trustees to help you to achieve the merger.
• Consider the risks associated with merging and how to deal with these risks.

Once completed the merger should be registered on the Charity Commission Register of Mergers to ensure future legacies which would be left to the closed charity are able to be received by the new or merged organisation.

Marianne Webb can be contacted at m.webb@gullands.com