Growth of Charity Mergers and Collaborative Working

This analysis was published in February 2022 in the latest Good Merger Index (GMI) from Eastside Primetimers, using data from both before and after the COVID-19 pandemic began.

Tracey O'Keefe (of Eastside Primetimers) stressed in the GMI report that it is difficult to know the causes behind these trends, but suggested that larger charities may "have been able to weather the storm, so have stopped or deferred more complex merger activity," created by COVID-19 while "smaller organisations, with limited options for mitigating the effects of the pandemic have resorted to being acquired by takeover to try and maintain their activities and beneficiairy impact".

However, as well as formal mergers, the research found that "closer partnership working and collaboration may also provide valuable opportunities for charities and social enterprises to increase their impact, whilst driving efficiencies".

In this briefing, we will explore three ways that charities can work together on different levels to facilitate efficiency, growth and sustainability, from a full merger to collaborative working.

Formal Merger

The Charity Commission (the Commission) uses the word 'merger' to describe the transfer or combination of the assets (and liabilities) of two or more seperately registered charities. Key considerations include:

• Mergers are major projects and will result in some or all of the parties restructuring or dissolving. A new charity may be formed, or one charity assumes control of the other.
• The process of a merger will depend on the legal structures involved, the powers contained in each charity's governing documents and the assets of each charity. Consent may be required from the Charity Commission to enable the merger.
• Benefits include more effective use of resources, expertise, knowledge and information, having a single and more powerful voice, enhanced service delivery, avoidance of duplication and improved access to funding.

Group Structure

Group structures are a distinct form of working together, enabling charities to fulfil common purposes over a wide area, or deliver a complex range of related services to their beneficiaires. Key considerations include:

• A group structure is a formal association of separate organisations, which can take many forms. This could involve for example, a partner charity setting up charity and non-charity subsidiares.

• Common features include:

• • • the group members acting collectively to deliver a range of services to beneficiaires
    • a formal agreement is in place
    • the group may consist of organisations which are both charitable and non-charitable
    • all organisations within the group will have their own name and distinct objects.
    • the group will produce consolidated accounts

• Where a parent body or charity sets up other charity and/or non-charity subsidiaires, it is likely that the activities carried out by the other charity and/or non-charity subsidiaires will either be specialist, non-charitable or involve some form of risk.

Collaborative or Partnership Working

Collaborative working describes joint working by two or more organisations in order to better fulfil their purposes, while remaining as separate organisations. Key considerations include:

• Collaboration can apply to any aspect of the charities' activity, including administration, fundraising, resource-sharing, streamlining costs, campaigning and service delivery.
• Collaboration is flexible with arrangements ranging from very informal agreements to formal partnerships. The arrangements can last for a fixed period or be permanent.
• Sometimes collaborative working can lead to a formal merger.
• Two common risks however are that the collaboration may divert resources from existing activities or that it may compromise a charity's independence. Trustees should be clear from the outset about the impact of the collaboration on their organisation and its beneficiaries.

Trustees should frequently consider whether their work can be better delivered in partnership with others, whether that be via a formal merger or more informal collaborative working, with the ultimate aim being to provide the very best services for the charity's beneficiaires.

When considering a merger or collaborative working, the trustees must act in accordance with the charity's governing document, essential trustee duties, and the law.

As Tracey O'Keefe says, "what the GMI report shows is that, with clear strategic focus and commitment, merger and wider partnership working remains a key route to improving sustainability and delivering impact for beneficiaries. As such they should be central to both executive and board thinking as we continue to navigate the pandemic and its aftermath".

Useful Links

Choosing to collaborate: helping you succeed

Collaborative working and mergers: an introduction

Small charities turn to merger during Covid period

For more information on charity mergers, please contact Shivaji Shiva in our Charities team on 0121 227 3724, or complete the form below.