Charity Merger Review
21 August 2014 at 9:59 am
A review of charity merger trends in the UK has found that health and social Not for Profits make up the majority of mergers, with mental health and disability organisations showing high levels of integration activity.
Not for Profit Management and Board Consultancy company, Eastside Primetimers has published what it says is the first comprehensive review of charity merger trends in the UK called The Good Merger Index .
The Good Merger Index provides a snapshot of consolidation trends from January 2013 to April 2014, with a review of 189 organisations undertaking mergers in that period.
The Review said its framework included describing different types of Not for Profit deals as: Merger, Takeover, Subsidiary Model, Group Structure and Exchange of Services.
The Review said that during the research they found some confusion over terminology. “Standard legal terms like “merger” and “acquisition” do not always adequately describe what is really going on in a charity merger, where the variables are less straightforward than in the commercial world,” it said.
“These are management terms rather than legal definitions, describing issues of identity; the composition of leadership teams; and public explanation in different ways.”
Key Findings of the the Review include:
- Organisations involved in mergers were turning over collectively £960m, ($1715 million) or some 2 per cent of total UK voluntary sector income.
- More than 32,000 employees, or 4 per cent of the sector’s workforce, were affected by being part of a major strategic change in this period.
- More than £225m ($402 million) of income was transferred through the deals identified in the survey
- There was a particular concentration of merger activity among health and social organisations, which featured in 50 per cent of all deals and 90 per cent of the largest deals. Of these, mental health and disability stood out as areas with high levels of activity.
- Many mergers happened through existing relationships, at a local level, between charities of roughly the same size.
- The convergence of social care budgets forced organisations to merger in order to reduce costs, stay competitive and offer a wider range of services.
“There were many interesting cases of merger in 2013 although the overall numbers indicated that charity consolidation is at a fairly early stage,” Richard Litchfield, CE of Eastside Primetimers said.
“Negative perceptions of merger seem misplaced as in 75 per cent of deals, the acquired organisations were able to retain some form of identity, management control and Board representation.
“By increasing the understanding of the mergers going on in the sector right now; by spotting the trends behind different structural, branding and governance options; and by clarifying the options available through a simple five model formula; we hope charity leaders will be able to make better decisions about the merger options available,” he said.
In Australia, anecdotal evidence suggests that there a small number of mergers and attempted mergers each year.
The charity regulator, the ACNC, which began operating in December 2012, agrees.
“The ACNC’s Registration team has received around six inquiries from organisations seeking advice on merging since our inception,” an ACNC spokesperson said.
The ACNC offers it tips on merging here.
Earlier this month disability and mental health service providers, Achieve Australia and Break Thru People Solutions, announced their decision not to amalgamate despite the organisations saying in June it could position the “new” organisation as a national leader in the sector.
According to a joint statement: “Achieve Australia and Break Thru People Solutions advises that the proposed amalgamation announced on June 5, 2014 will not proceed at this time.
“The two organisations will continue as separate entities, working independently and cooperatively for the benefit of those they serve – creating futures and building extraordinary lives.”
Justice Connect has also has an information sheet on amalgamating or merging incorporated associations here.