Charity mergers up by a third following lockdown, figures suggest

Charity mergers across the sector rose by nearly a third during the first three months after lockdown, figures indicate. 

The social sector consultancy Eastside Primetimers has analysed Charity Commission data between March and June and compared it with the same period last year. 

It found there were 114 mergers during the three-month period this year, compared with 89 during the same timescale in 2019.

The consultancy said the figures should be treated with some caution because the regulator’s data typically included some legal housekeeping around micro-charities and the late registrations of previous deals.  

Significantly, though, some mergers announced over the summer have explicitly cited the pandemic as a contributing factor, Eastside said. 

Two Age UK charities in Sussex noted that “the impact of coronavirus on income across the charity sector emphasises how important it is for charities to work together to reduce overheads”. 

Additionally, The Brain Tumour Charity and Meningioma UK indicated that their recent merger had been “accelerated” by soaring demand for support services.

Dave Garratt, an associate director for mergers and partnerships at Eastside Primetimers said that although the sector faces a funding crunch, a surge in consolidation is not a given. 

“We’ve been here before,” said Garratt. “Our Annual Good Merger Index surveys found that, despite predictions, austerity in the 2010s didn’t lead to a particularly marked increase in mergers in the charity sector.

“Rather than combining for impact, organisations have tended to ‘circle the wagons’, striving to meet their beneficiaries’ needs in more cost-effective, innovative or simply reduced ways.”

The consultancy said that there were many reasons why charities did not consider merger an option, including concerns about autonomy, fear of reputational damage, and job security.

“Charities will always have the option to shrink and serve fewer people, but the onus is clearly on charity trustees and management to think proactively about whether this is really enough, or if they could instead make more of a long-term difference by joining forces with a complementary organisation,” said Garratt.

He noted that commissioners and the sector bodies representing hard-hit charities could facilitate introductions between compatible entities and provide support to offset some of the complexities of merger. 

“The most transformative mergers are always those with a clear strategic rationale, not those carried out as a last-minute rescue.”

Garratt conceded that it was still too early to say whether there would be more mergers as a result of Covid-19, because the real financial impact for many charities will not be felt until the sector gets into the budget planning cycle for the next financial year.

He added: “What is clear is that both the risks posed by Covid-19 and the potential benefits of consolidation should mean that at least considering merger must be a vital part of every charity’s governance toolkit.”

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