On 16 June we welcomed over 80 charities for a webinar on mergers and collaborations. Speakers Nick Vaughan (Head of Charities, Paris Smith), Michael Moore (Head of Corporate, Paris Smith), Helen O’Kane (M&A Charity Specialist, BDO) and John Maton (Assistant Director of Legal Services, Charity Commission for England and Wales) covered the legal, financial and regulatory issues that charities need to consider to make better informed decisions about whether collaborative working or merging is right for them.
There has been some dispute whether charity mergers have increased or not over the past 18 months compared to previous years. The effect of COVID-19 on charities and their finances has thrown the spotlight on how charities can better support their beneficiaries and deliver their services. Nick, our Head of Charities noted that we have seen an increase in legal enquiries around mergers and collaborative working, but more widely the predicated surge in mergers hasn’t materialised. John Maton of the Charity Commission agreed that the Commission had not seen the anticipated rush of, as he called them, reactive mergers.
So, does this mean that charities feel there are serious barriers in place to merging? Whilst we see predictably lots of mergers in the health and care sector and business sectors (where vision and objectives often naturally align), our poll results suggest that many charities find it incredibly difficult to find a suitable partner to merge with. In fact, 50% felt it was the biggest barrier to success.
The charity search function on the government website can be a useful tool to find potential merge partners, and its functionality has recently expanded.
So if merging appears to be difficult, how successful are charities at working together more informally and how important is this in the successful delivery of their mission? Nick commented that, “Any kind of joint working should be done for the benefit of its beneficiaries and the better delivery of services to them.”
We have seen many of our Charity Forum members be very generous with sharing ideas and best practice, but when it comes to more formal collaborations there is still some hesitation in the sector. This observation was reflected in our poll results. When asked how they collaborate, 30% of charities said that they did this at a strategic level, while only 15% collaborated on a financial level.
No matter the size of the charity the difficulties of COVID-19 have demonstrated the importance of strategic planning. Joint working, collaborations or mergers should be at least considered in this planning, concluded Nick. Helen O’Kane echoed this view; BDO are increasingly seeing charities think more strategically and asking themselves where they will be in 30 years. Helen commented, “Charities have a unique obligation to think about their legacy.”
All of our speakers noted that while mergers should be included in any strategic and board level conversations, they must be considered carefully. John Maton of the Charity Commission quipped that a “merger is for life, not just for Christmas” as he spoke of how a merged organisation is not easily divided. John’s key take away in his presentation was everything about collaborative decision making must come back to the objects of the charity. He noted that it is surprisingly easy for trustees to view their objects as restrictive. A merger can help a charity to further its objects, but they must be central in decision making.
Michael Moore, Head of Corporate at Paris Smith advised that if charities are considering merging, working with a potential merger partner collaboratively or more informally can be a great pre-cursor, giving an indication as to whether it will work. Collaborative working may even achieve the charities’ merging objectives.
Ultimately, it was agreed that charity mergers can be a challenging undertaking for any charity. But it certainly seems the sector already collaborates in many different ways. Joint working should be part of strategic plans for the future.
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For more information and further advice on mergers or collaborations, take a look at how our Charity team can help you.