Mergers, what mergers?
Brief summary:
The low rate of mergers within the charity sector reflects a complex interplay of financial, emotional, and practical considerations. Yet, with the right approach and mindset, the potential for positive change through mergers remains vast. If it’s something you’re considering, we can give you the information to make informed decisions.
There are just under 170,000 charities in England and Wales, yet last year, there were just 48 mergers involving 96 charities in 2022/23, according to the latest merger index from Eastside. That represents less than 1% of the sector. Here we look at why those numbers might be so low.
1. There’s not always a clear incentive like there is in the private sector
Unlike their counterparts in the private sector, charities operate without the driving force of shareholder pressure or the lure of financial gain that often motivates mergers and acquisitions. Without these push factors, the position can remain static.
2. People care about identity, or don’t want to lose their job
For many, the appeal of a charity lies in its local identity and roots within the community. Trustees, CEOs, and other major stakeholders can be hesitant to see this identity diluted or lost . Furthermore, the very real fear of job loss post-merger can act as a significant deterrent.
3. Human factors are ignored
At the heart of any merger issue is the human element. Mergers are not just about strategic alignments or financial considerations; they are profoundly about people. Emotional attachments, pride, and personal agendas can cloud judgment and derail the process. We’ve heard of disagreements over seemingly minor issues, such as the naming of the merged entity or the order of names on a presentation slide, highlighting the challenges of managing human factors effectively.
4. They can be expensive
The cost of merging can often be underestimated. Legal and consultancy fees, and the sheer amount of time and effort required can be substantial. Despite these costs, if a merger is pursued, it's crucial that it's done thoroughly and properly, with an understanding of the financial and human investment involved.
5. People don’t have the time
Merging organisations require a detailed plan that encompasses communication strategies, stakeholder management, and a clear roadmap with milestones. In a sector where resources are often stretched thin, finding the time and energy to commit to this process can be challenging.
Despite these obstacles, it's important to acknowledge that mergers, when executed well, can bring about significant benefits. They can enhance service delivery, extend reach, and improve efficiency. However, mergers are not always the answer. The decision to merge should be carefully considered, with a thorough understanding of the challenges and a clear vision for the future.
Ultimately, the low rate of mergers within the charity sector reflects a complex interplay of financial, emotional, and practical considerations. Yet, with the right approach and mindset, the potential for positive change through mergers remains vast.
If you’re interested in the possibility of greater collaboration right up to and including merger, we can take the load off, and make it easy for you to have the information to consider these options properly.