|26 Sep 2022|
It is no surprise that the cost-of-living crisis is affecting everyone across the board. This crisis is having a knock-on effect in that more charities are likely to consider mergers as a strategic choice that makes sense. In the world of corporate finance, merger and acquisitions (M&A), are commonplace. But what does merger mean in the Non-For-Profit (NFP) world? In simple terms, a merger of charities means two or more separate charities come together to form one organisation. The end result would be the following:
For charities to merge, the focus is mainly on finding a partner who has similar beliefs and values to their own – this would all ensure a seamless transition for a merger. However, there’s a lot more to think about when deciding to merge with another partner. While close partnership working and collaboration may aid in increasing a charities impact and share back-office costings, the decision to formally combine resources in a merger should be carefully considered and needs appropriate professional advice.
Risk Management is a central factor of the decision-making process when a merger is considered. It is important to carry out an initial assessment early in the process as this will flag any potential issues that can be addressed in discussions. The assessment will need to be revisited and expanded later in the process. Issues that arise can be any one of a number of things including, cultural, structural, financial, professional or political.
Identifying issues early can help all parties to decide whether these issues can be overcome or if the merger should not progress. Issues to look out for when assessing a potential merger partner include:
Once all parties are confident that any issues can be managed, mergers can bring real benefits to all involved, which includes:
All charities involved in a merger should seek and evaluate input from key stakeholders and core advisors including legal, finance and HR professionals. In the interest of each charity involved in the merger, gains of merging must be clearly stated. Compatible objectives, culture and values are all key to merging and there should be a unified approach at board level with all trustees agreeing on why the merger is the best way forward.
An informed decision should be reached based on the following:
It is important for charities to measure success in determining if the merger has been completely successfully. For example, have the charities benefited from an increased income, extended reach, cost savings, improved outcomes and staff satisfaction. All these measures need to be evaluated and it’s important to consider how. Clear success measures should be identified at the beginning and used to monitor the merger’s achievements against the original objectives outlined in the business case.