Eastside Primetimers have published the second annual Good Merger Index – our comprehensive review of not-for-profit sector mergers – providing an expanded look at consolidation in the sector.

2014’s Index, the first of its kind, focused on merger activity among registered charities. However, this year we have fulfilled an aspiration to take a wider view of the not-for-profit sector, including a dedicated chapter on housing associations.

The main finding is that the overall level of merger activity in the sector is low. Among charities and social enterprises, 129 organisations undertook 61 deals in 2014/2015, out of over 160,000. This was also broadly in line with the level of consolidation we found in the 2013/4 Index, showing merger activity is fairly static. 16 housing associations concluded 8 major deals, in the context of a 1,700-strong sector.

Another new addition this year is a look at the financial position of charities engaging in merger. We found that 53% of charities opting to merge or be taken over are loss-making, while 76% of organisations expanding are in surplus. This confirms for the first time the conventional wisdom that most mergers are “rescues” of failing organisations, rather than strategic moves intended to improve services and outcomes.

We also looked again at types of mergers and found that “true” mergers are still rare (18%, compared to 23% in our 2014 Index), while the number of takeovers rose sharply (62% for 2014/2015, up from 43% last time). The remaining 20% involved a charity being taken over as a subsidiary, sometimes as a part of an established group structure. We believe the prevalence of takeovers is driven by the “rescue” dynamic we observed – small charities in trouble have less power to negotiate to retain autonomy and identity within their new parent, compared to if they had sought merger from a position of strength.

However, we found continuing discomfort with acknowledging the prevalence of takeovers in the language the sector uses – 56% of announcements described deals as mergers, only 27% described them as takeovers.

Health and social care mergers were the most common, consistent with last year’s report. Around 5% of leisure trusts in England & Wales were involved in consolidation, representing 3 of the 10 biggest deals. And significant numbers of deals involving infrastructure organisations, including local Councils for Voluntary Service (CVSs), were reported, driven by significant reductions in local authority funding.

Looking at housing associations this year allowed us to identify differences between different parts of the not-for-profit sector, including the way in which group structures are more developed in the housing sector.

Richard Litchfield, CEO Eastside Primetimers said: “While some charity mergers were driven by strategy, the majority were driven by financial distress. 53% of transferring organisations had made losses in the year before their merger, which may explain the rise in full takeovers. Housing Associations seemed to take a more clear-headed approach, choosing mergers that involved groups and subsidiaries. There are lessons here for charities, as these arrangements help merging organisations retain their autonomy and identity within a larger structure.”

We also contrast the proactive role the Homes and Communities Agency (HCA) plays with the softer role taken by the Charity Commission. The findings question whether the Charity Commission and funders could be doing more to protect charities.

Richard Litchfield, added: “The relatively low number of deals surprised us given that the scale of the challenges faced by the sector. The environment is becoming brutal and it’s clear the sector needs both more mergers and better mergers. We should remember that early action could have found a home for the essential services of high-profile charities that failed, such as BeatBullying and Kids Company”.

Key findings of the Eastside Primetimers’ Good Merger Index 2014/5



  • 129 charities and social enterprises undertook 61 deals between May 2014 and April 2015
  • The study analysed 45 of these deals in detail, involving 89 charities. These deals involved the transfer of £110.2m of income
  • 53% of charities that merge or get taken over were in deficit
  • Separately, we analysed 8 housing association deals involving 16 organisations, involving £360m of transferred income
  • The total income for charities and social enterprises involved in mergers was £811m (2% of the sector’s turnover)
  • Total income for merging Housing Associations we looked at was £765m (5% of the HA sector, worth £15.6bn)
  • The largest charity deal was the merger that formed Breast Cancer Now, while the biggest HA deal was the formation of Stonewater
  • The most active charitable organisations were GLL, Centrepoint and NCVO
  • Among charities, mergers represented: 18%, Takeovers: 62%, Subsidiary Model 13%; Group Structures 7% and Asset Exchanges 0%
  • 3 of the 8 housing deals we looked at were group structures; two newly-formed groups in the North West (One Manchester and Torus) and Accord’s adding of Heantun Housing to its existing group. 4 more were takeovers, only Stonewater was a straightforward merger
    • Sector hotspots were health & social care (43% of all deals), intermediaries (16%), justice (10%), community (7%), employment (6%) and sport/leisure (5%)
  • The regulators in the housing and charity sectors played significantly different roles in safeguarding their sector, and there are lessons to be learned here

Top deals in the charity and housing association sectors

top-20-deals housing-assoc-deals

We’re keen to hear feedback from you on the Good Merger Index – please leave your name, email and any comments here. Note that your details will not be passed on to any third parties.

[contact-form][contact-field label=’Name’ type=’name’ required=’1’/][contact-field label=’Email’ type=’email’ required=’1’/][contact-field label=’Comment’ type=’textarea’/][/contact-form]

Eastside Primetimers

Share This