Eastside Primetimers has published what we believe to be the first comprehensive review of charity merger trends, The Good Merger Index 2014.

The Good Merger Index came about because we were curious to find the answers to some simple questions, like how many charities are merging, where are they taking place, and what models are being adopted? We found a lot of anecdotal evidence, but little empirical data. And as there was no single source of consolidated information, we decided to create one.

The study looks at consolidation trends from January 2013 to April 2014, with a review of 189 organisations that undertook deals in that period. This provides us with a baseline of data from which to create future comparative studies and spot future trends.

During our research we found some confusion over terminology. Standard legal terms like “merger” and “acquisition” do not always adequately describe what is really going on in a charity merger, where the variables are less straightforward than in the commercial world. And so we created five sub-genres to help describe the different types of charity merger we observed: Merger; Takeover; Subsidiary Model; Group Structure and Exchange of Services. These are management terms rather than legal definitions, describing issues of identity; the composition of leadership teams; and public explanation in different ways.

Key Findings

We found organisations involved in mergers were turning over collectively £960m, or some 2% of total voluntary sector income.

More than 32,000 employees, or 4% of the sector’s workforce, were affected by being part of a major strategic change in this period.

More than £225m of income was transferred through the deals identified in the survey, which we used as a proxy for the size of merger activity taking place.

GoodMerger_ConsolidationSnapshot

 

Top 10 Deals

The emerging picture was one of a small number of large transformative mergers, and a comparatively long-tail of local small mergers. The largest 10 deals represented 85% of the income changing hands through merger.

 

GoodMerger_table_2

Sector hotspots

There was a particular concentration of merger activity among health and social organisations, which featured in 50% of all deals and 90% of the largest deals. Of these, mental health and disability stood out as areas with high levels of activity.

Many mergers happened through existing relationships, at a local level, between charities of roughly the same size.

The convergence of social care budgets forced organisations to merger in order to reduce costs, stay competitive and offer a wider range of services.

GoodMerger_SectorHotspots

 

Richard Litchfield, CE of Eastside Primetimers said:

“There were many interesting cases of merger in 2013 although the overall numbers indicated that charity consolidation is at a fairly early stage. Negative perceptions of merger seem misplaced as in 75% of deals, the acquired organisations were able to retain some form of identity, management control and Board representation.

By increasing the understanding of the mergers going on in the sector right now; by spotting the trends behind different structural, branding and governance options; and by clarifying the options available through a simple five model formula; we hope charity leaders will be able to make better decisions about the merger options available.

We welcome your feedback on the report, and would like to invite all charity managers to sign up for the study, receive further information, and take part in our charity leaders’ poll.”

Please leave your name and email address here to find out more about the Merger Index.

Eastside Primetimers

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