The number of charity mergers fell to record low levels last year, latest figures show.
The Good Merger Index, published today by the consultancy Eastside People, reports there were just 48 mergers involving 96 charities in the year to the end of April 2023.
It is three fewer mergers than in the year before and the lowest level since Eastside started producing the report 10 years ago.
The report says the findings indicate that the support provided by the government and funders helped charities navigate the Covid-19 pandemic without the need to merge with another organisation.
“Overall, we believe that the fall in the number of all mergers combined with the improvement in the financial position of transferors indicate that Covid did not immediately impact the finances of all organisations in the sector,” the report says.
“Similar to other sector studies we now believe that the government’s furlough scheme and changes in the behaviour of funders were generally very helpful to the sector.
“Despite the immensely difficult operating conditions of Covid, our analysis indicates that financial stress was largely well-managed and did not create the pressure, at least immediately, for charities to merge.”
The report notes that “management time was at a premium during Covid as charity leaders battened down the hatches to survive”.
This could explain why just four of the partnerships were identified as being mergers of equals.
The report says that “takeovers”, defined as where a smaller charity transfers its assets and activities into an often larger counterpart, made up the vast majority of merger activity over the course of the year.
The report says the proportion of mergers that were classed as takeovers continues to increase year on year and last year reached the highest percentage of transactions over the past 10 years.
This “continues a growing trend since before the Covid pandemic”, the report says.
The consultancy said that despite the lower levels of merger activity over the past couple of years, it expected numbers to rise.
“It is hard to predict – and we’ve certainly been wrong before – but we think that we will see an increase of mergers and partnerships in 2023/24, as more charities consider the benefits of collaboration and are able to find a way forward by working together,” the report says.
The largest merger recorded in terms of income transferred was the disabled peoples’ support charity the Enham Trust becoming a subsidiary of the housing provider the Aster Group, a deal worth £10.5m.
The report is compiled largely from merger data provided by the Charity Commission, although this only covers charities in England and Wales and cases where one organisation has been dissolved; and by reviewing media reports including those published by the charity and housing sector press, other local and specialist publications, plus charity websites and social media.