To merge or not to merge?

    The current challenging fundraising and commissioning climate does not offer the most fertile ground for two or more Voluntary and Community Sector Organisations (VCSOs) to sow the seeds of a merger. Many charities see merger as the only alternative to closure. Others feel compelled to merge by commissioners who expect to deal with larger organisations. But handled in a positive and committed manner, a merger can enhance support and service delivery to the VCSOs’ beneficiaries whilst also strengthening financial sustainability.

    Merger is a big decision. It requires detailed, careful and calm analysis. It is best approached in a climate of openness, mutual respect and trust, accompanied by a genuine understanding of each other’s values, vision, mission and operational realities. An absence of these, allied to a perceived or actual imbalance between the parties, can lead to much greater challenges and difficulties. Fear of the consequences of a merger from one party, or a belief that it is a takeover, can also fundamentally undermine the prospects for success.

    Reasons for Merger:

    1. Create more value and sustainability in a new entity than can be delivered alone by improving efficiency, removing and/or reducing duplication, renewing structures (including the Board, Memorandum and Articles of Association, and staff teams)and processes, services and products.
    1. New fundraising, commissioning and income generation opportunities through being a larger organisation.
    1. Cost effective method to support growth by accessing each other’s managers and staff, services, skills and processes that would be expensive to develop alone.
    1. Improve visibility and strengthen voice and reputation.
    1. Achieve objectives more quickly than through organic growth.

    Reasons against Merger

    1. Distress for employees with some (possibly those who would be most helpful to a new organisation) deciding to leave, allied to uncertainty about the new entity from commissioners and stakeholders.
    1. Conflicting corporate cultures, business models and especially personalities.
    1. The costs, time and risks involved in negotiating, agreeing and implementing a merger.

    Neither of these lists of reasons for and against merger is exhaustive.

    For a merger to have the best chance of success there are several basic rules that should be followed.

    The Basics

    1. The merger should be clearly in the best interests of each of the VCSOs’ beneficiaries. All too often this is forgotten or relegated behind financial and operational considerations.
    1. The objectives, values and cultures of those involved must be compatible, or at least have a genuine chance to align and be mutually supportive.
    1. From the very outset, all interested parties (especially staff) must be kept in a clear and structured communications loop. Rumours, mixed messages and deliberate falsehoods will flourish in a vacuum.
    1. A large majority of Trustees, ideally all, should be united in believing that a merger is the best way forward.
    1. Identify and agree the key roles, responsibilities, resource implications and preferred timeline for the merger process.

    Merger is however not the only way to skin the cat of challenging commissioners, and/or diminishing fundraising opportunities. For many VCSOs structured joint working on an operational or project specific basis is a viable alternative.

    Joint Working:

    1. Pooling “back office” functions such as payroll, finance, ICT etc.
    1. Filling a vacant post(s) in one VCSO by sharing it with an appropriate member of staff from another/agreeing to the appointment of a single post-holder to cover more than one VCSO.
    1. Joint bidding for contracts that require larger turnover and/or geographic coverage.
    1. Use of each other’s staff and expertise to deliver existing contracts, and to bid for and deliver future contracts.
    1. Mutual support for the delivery of staff training and personal/professional development.
    1. Sharing of best practice through the consolidation of expertise and/or a single service structure.
    1. Joint management arrangements such as regular and structured meetings between Chairs, Chief Executives, senior management teams, and Board to Board.

    Such joint working can bring tangible benefits both in terms of a VCSO’s viability, and also the effectiveness of the services and support it delivers. It also creates the time and space for VCSOs considering a merger to gain a real understanding of each other.

    Mergers are not for the faint hearted. But a new vision and mission, allied to a renewed fit for purpose Board, can enthuse and engage staff, stakeholders and commissioners. Management and capacity issues that limit growth in individual VCSOs can be easier to address and resolve in a merged entity. “Back office” savings can be realised. A merger can create greater presence, profile and reach for the new VCSO. Most of all though the ability to support a VCSO’s beneficiaries can be significantly improved through a merger.

    Dr Simon Murphy is an interim Chief Executive who advises VCSO Boards and senior managers on mergers and joint working.

    Further reading

    “Checklist for Mergers” Charity Commission “Making Mergers Work” Charity Commission

    “Vital Ingredients when Collaboration and Mergers are on the Menu” London Voluntary Service Council and Voluntary Sector Forum, January 2013

    “Story of a Merger: DTA and Bassac Create Locality” Institute of Voluntary Action Research, November 2011