In tough times merging with another charity is worth thinking about.
Julian Lomas
Last year we reported that the 2023 Good Merger Index report, published by Eastside People, showed that charity mergers were at an all time low, confounding post-pandemic expectations. A year later, their 2024 report reveals a large increase in merger activity in the charity sector with a rise of almost 30% in the number of mergers since last year and a 500% rise in the value of merger deals and a 113% rise in the aggregate size of charities involved in mergers.
The report puts this down to growing demand for charity services and rising costs, leading charities to explore mergers as an option for sustainable growth. Therefore, it now appears that 2022 and 2023 were a ‘blip’ in the data (the number of mergers is now back to a level similar to that seen pre-pandemic) and that more charities are now considering merging to deal with the double whammy squeeze on fundraising caused by the pandemic and the cost of living crisis.
Most of the increase in merger activity has been amongst larger charities. However, almost 50% of the mergers in 2023-24 involved charities with annual income under £1m, demonstrating, yet again, that merger is an affordable and worthwhile option across the full spectrum of charities types and sizes.
We continue to believe that with the perfect storm facing many charities, it remains a good time for charities to be thinking about mergers. As our previous articles have explained, there are many factors to consider when thinking about a merger, in particular:
Is there a good values and culture fit between the charities considering a merger?
What are your objectives for the merger?
What will happen to the people (Trustees, staff and volunteers) following a merger?
What structure will the merged charity have?
What will be the costs of the merger and are they justified by any savings or extra impact that will arise once things have settled down after the merger?
Unless you need to merge quickly to avoid a disorderly financial collapse of your charity, we always recommend taking time to work through these and other issues before getting into the formal due diligence and legal work. That can be expensive and the money would be wasted unless you have satisfactory answers to the key questions of principle. You may be able to work through these issues yourself but it can often help to have an independent facilitator to help you navigate the complexity, make sure you ask the right questions and help you find the right answers for your situation.
If you would like to find out more about how to make mergers successful or about our services for supporting collaborations and mergers more generally, please contact us at julian@almondtreeconsulting.co.uk to arrange free initial telephone discussion