In our view, the picture will not be clear for some months as charities continue their strategic thinking and assess the long term impact on their operating models.
Traditionally, there has been some hesitancy to look at mergers within the charitable sector, but it is certainly something trustees should consider as part of their overall thinking and planning. Trustees should properly assess whether a potential merger could bring benefits to the way in which their charitable purposes are advanced for the benefit of the charity's current and future beneficiaries.
The benefits of a merger within the charity sector are well documented and range from potential cost savings to investment in joint infrastructure, access to an increased pool of donors, the ability to bid for larger contracts and to resolving succession issues. Every situation will be unique to the parties and should be well understood and assessed.
The legal process of a merger can sometimes be confusing but generally follows some well-established lines, which are broadly:
The technicalities of these stages will, of course, depend on the parties involved, their existing charitable structure, the complexity of their operations and the regulatory bodies and other third parties that may need to be involved.
One of the first areas that should be investigated is the charitable objects of the parties involved and whether they are compatible and allow for a merger. This is usually achieved by the transfer of assets from one party to the other, or to a newly established charity that will take on the assets and liabilities of both organisations.
The other legal issues to be aware of include:
While the legal process of a merger can sometimes seem overwhelming, our experience is that where charities are able to jointly identify the benefits for both charities involved and keep this in focus throughout the process and the parties are appropriately advised, they are able to achieve a sustainable and robust merged charity.
Our upcoming webinar, 'Charity Mergers - A Look Behind the Legal Process', will give practical tips to trustees, chief executives, and finance directors (as well as other stakeholders) on the merger process, and improve knowledge and understanding on the topic to assist charities in making strategic decisions in the interests of their beneficiaries. Book your free place today.