The benefits of merging for smaller charities
The practice of mergers in the charity sector is not uncommon. Over the years we have seen many examples where two high profile charities operating in the same sector have come together for the greater good of the organisations and those who they serve. Age UK, for example, was the result of a 2009 merger between Age Concern England and Help the Aged, which itself had merged with Research into Ageing in 2001.
There has also been some consolidation of connected trusts under the same umbrella. As recently as June 2016 it was announced that the Prince of Wales’ built environment charities are to merge, with the Prince’s Regeneration Trust (PRT) becoming a subsidiary of the Prince’s Foundation for Building Community (PFBC).
A lifeline for smaller charities?
When charities of this size are exploring - and often pursuing - the benefits of mergers, it should be a wake-up call for smaller charities, many of whom continue to struggle with financial pressure from public funding cuts.
Despite this, few smaller, regional charities seem to be open to mergers. A report published by the Foundation for Social Improvement (FSI) in June shows one in 10 small UK charities describe their chances of closure as “likely” in the next 12 months – but only 2% of small charities are currently considering a merger.
Merging with a similar like-minded charity could help to deliver the increased funding, knowledge, support and services needed not only to survive, but to thrive. It could deliver economies of scale, bring additional expertise into the organisation and provide financial security – helping to deliver a better overall service to the users and stakeholders who both charities strive to help. On an operational level it could mean better facilities, increased fundraising capacity and reduced overheads.
To put this into context, a quick Google search shows at least four or five relatively small homeless charities in Leeds, where I work. When I tried to help a rough sleeper near our office last year I contacted the City Council and they suggested up to eight separate charities which I could contact for further help. Each is trying to service the same sector and clearly working extremely hard to make a difference - no doubt with their own background, supporters and proud independence - but it defies economics.
When funding is tight and workloads are increasing, something has to give. Having said that, I do appreciate that mergers are not the panacea for all financial issues, but they need to be on the agenda as charities are expected to do "more with less" in austerity UK.
Increased collaboration between charities
Of course, I am not the first to raise this issue. The FSI report warns that smaller charities must form "strategic alliances" in order to survive closure - more than a quarter are faced with declining funds and almost a third report a rise in workload, which is putting many charities at risk.
Mergers can offer growth potential and future security, but they are not the only means of collaboration. Joint ventures (6%), formal partnerships (20%) and strategic alliances (36%) were all listed by charities as ways in which they are improving efficiencies and reducing costs. Networking (65%) was by far the largest way in which charities work together, as they seek to make connections, increase knowledge and raise awareness.
Collaboration of any form is vital in the charity sector, particularly in the current climate. Without the safety net of central funding, charities must work harder, think smarter and be more innovative. The best way to do that is to learn from and share with others – but more than a third of charities (34%) are still not involved in any collaborative work at all, according to FSI.
Charities being put off mergers
So why does there remain some trepidation from smaller charities about looking at the potential of mergers?
Part of it may be a lack of commercial acumen from charities which may not have the resources and professional support of their larger counterparts. There may also be a sense of pride and independence – a reluctance to "give away" everything that the charity has built up. Whilst understandable, neither of these should really apply if the charity is at risk of closure due to funding difficulties.
There is also some inevitable concern over the complexity and potential cost of the merger process but legal, tax, HR and financial barriers can be overcome provided you work closely with your professional advisers. There will inevitably be a cost involved, but when you consider the long term implications – and the potential cost savings that could be achieved by the new organisation – it may not be as daunting as it first looks.
Looking forwards with confidence
Of course, the current situation is far from bleak for the charity sector, but smaller charities in particular must be increasingly mindful of their future finances. With this in mind, collaboration is a sensible choice to improve efficiency and competiveness.
As we have already heard, there are a range of ways in which charities can collaborate which do not have to lead to great expense, nor an unnecessary loss of independence – and for some charities, this might include the possibility of mergers. Consider the benefits and look forwards – you might just be pleasantly surprised at what the future could hold for your merged organisation.
