Five steps towards a charity merger

Many charities are struggling to survive, facing financial uncertainty and rising costs. Merging with another organisation, with a shared purpose, could be the answer. Mergers can help organisations to improve services, make better use of resources, and benefit from shared knowledge and skills.

 

While the process of merging will differ from case to case, here are five initial steps you can take.

 

 

Do your research around mergers

 

If you’re beginning to look at your options, these two resources are a good place to start: 

• Charity Commission: The ‘Guidance on how to merge charities’ explains mergers in detail, including if and when you would need to involve the Charity Commission. It also outlines the many issues to consider, including potential job changes or redundancies, compliance with relevant legislation, and the implications of sharing data
• NCVO: This step-by-step guidance and information about mergers, includes decision-making, due diligence, how to plan the process, and how to communicate with staff and stakeholders. It also explains how to check if your charity has the power to merge 

 

Consider the different types of merger

 

It might be that you’ve been collaborating with another charity for some time, and that a merger is the next natural step. Or maybe you’re struggling financially and think that a merger with another charity is a strong next move. 

 

There are different types of merger, and you’ll need to consider which will work best for you and the other organisation. And, if ultimately trustees decide a merger isn’t the best move, there are still ways to collaborate with other charities.

Eastside People is a consultancy that publishes the annual Good Merger Index. It describes the main types of merger as:

• Full merger – two or more charities joining together to form a new one
• Takeover – one charity transferring its assets and activities to another
• Subsidiary model – one charity becoming wholly owned by another
• Group structure – two or more charities transferring activities and becoming part of a group
• Swapping assets – charities transferring or swapping services or assets  

 

Be clear on why a merger is a good idea 

 

Trustees are responsible for the decision as to whether to merge or not, and to make sure the organisation acts within the law. While a merger might feel like a good idea in protecting the charity itself, trustees need to see beyond that and ensure it’s the best plan for beneficiaries. 

 

As the NCVO explains: “You must be sure a merger will help you achieve the objectives of your organisation. Your potential merger partner/s should have compatible objectives to yours (as set out in the governing document) so that a merger allows you to continue current work.”

 

The NCVO also recommends that each charity understands the benefits, risks, and costs of the merger, and to check if collaborative working might achieve the same benefits as a merger. Culture is a key factor in a successful merger, so take your time to understand the other organisation’s values, culture, and ethos.

 

 

Don’t underestimate the costs and time of a merger

 

A merger is not a quick fix, so don’t underestimate how much it could cost and how long it might take. It could take many months of initial conversations with another charity to reach a decision about whether to merge or not – and that’s before the due diligence process begins.

 

You’ll also need to consider how much it will cost and if you can afford it. The Charity Commission outlines the types of funds you might need, including restructuring costs, relocation expenses, and integrating IT systems. And, depending on the complexity of the merger, it’s likely you’ll want external legal, HR, or management support. As well as bringing specialist expertise, this independent support can bring a helpful, unbiased viewpoint and insights.

 

The NCVO offers merger support through its team of governance and strategy consultants.

 

 

Communicate with consistency from the start

 

It’s unlikely that everyone will be enthusiastic about a merger, especially if it involves one charity moving its assets to another. So sensitive and timely communication is key.

 

Mergers can be understandably unsettling, and internal comms will have a key role in helping staff to understand the process and get on board with the changes ahead. In particular, be mindful of the language you use, avoiding phrases like “take over”.

 

All communications need to be a team effort across organisations and carefully coordinated to make sure that any overlapping audiences receive the same information. This consistent messaging will help to build confidence and reassure staff, service users, and stakeholders.