The past year has seen a lot of stories about charity mergers. A lot more are coming across our desks at Third Sector, and it’s obvious that the financial climate is driving people to think very hard about their independence.
Nonetheless, when you read these stories, it’s clear from the common themes that at least one of several things usually needs to happen for a merger to take place.The first is the retiring chief executive. More than 50 per cent of merger stories contain a line something like this: “Bob Jones will take over as chief executive when Hilary Willis retires next year after 18 years.”
It’s clear that the sector is full of chief execs who can see the beneficial possibilities of merger, but don’t want to give up their own job. They get the paperwork and agreements in place, then put off the event itself until they’re ready to retire.
Another theme is the reforming chair. Very often, when a charity suddenly decides to merge, it’s because a new man or woman has come in and decided to put their foot down. Sometimes they’ve spotted looming financial problems, sometimes they just see a need for change.
Third on the list is a lack of cash, because perhaps the most common reason for merger is that one organisation has realised it’s financially unsustainable, but another wants to save its work and its workers.
In short, mergers rarely happen when it’s not advantageous to the top people, unless there’s a compelling financial need.
Increasingly, though, there’s a middle path which gets around this. Another trend in the stories we write is the semi-merger: the group structure, the amalgamation, and the joint working agreement. For example, we might see charities agree to share a back office and a board, and have one chief executive report to another, but keep their branding and fundraising.
This “amergermation” is expedient, because it cuts out a lot of the power struggles you get with a full merger, and it’s also an effective way of getting some of the benefits of merger without having to go through costly restructurings.
They’re also a way for a large charity to gradually absorb a small one without the small charity getting too nervous. I’ve had several conversations with finance directors and chief executives at large charities who’d like to hoover up a lot of smaller organisations (of these, by far the most outspoken is Lesley-Anne Alexander of RNIB, but she’s far from alone.)
Small charities, on the other hand, seem more nervous, for obvious reasons: they fear a loss of identity, and of the bespoke service they offer their beneficiaries. This option allows them the financial protection found within a big group, while still affording them some independence. And it allows a full merger when the chief executive decides to retire.
Merger is obviously something which is going to remain a big deal for the sector. From the growth in stories in our pages, it looks like this year and next we will see many more full mergers driven by necessity, and also more “amergermations” driven by strategy.