Eastside Primetimers have published the Good Merger Index 2015/6, our third annual comprehensive look at charity mergers and consolidation activity.
The report demonstrates that despite increased discussion of charity mergers in recent years, consolidation actually remains static in the sector, with only 116 organisations (0.07% of a sector over 163,000-strong) merging – this is essentially the same level as before.
We also find that 61% of the smaller charities that merge or get taken over were in deficit (up from 53% in our last Index), while those acquiring tend to be healthier. This demonstrates that mergers are still often a ‘rescue’ move, rather than a strategic one.
Charities involved in mergers transferred £158m of income in 2015/16. The biggest merger saw the creation of the Masonic Charitable Foundation, a mega-merger of four previous charities with a notional value of £82m.
However, this year’s Index also contains two new features compared to previous years.
Firstly, it returns to 10 major merger deals from the first year of the Index (2013/4) to look at how they are progressing a year or two into merger. While it is by no means conclusive, this gives a decent early snapshot. Most see their combined income increase, in some cases very clearly becoming more than just a sum of their original parts. On profitability they are more mixed, however, demonstrating some promising starts but also the complexities charities face in evaluating their merger outcomes.
Secondly, drawing on both our own expertise and that of our two partners for the launch of this report – Big Society Capital and the charity law firm Russell-Cooke – we end this report with a set of proposals intended to stimulate debate about how to enable more charities to seek merger. These suggestions include new Charity Commission guidelines, a voluntary merger code, the provision of new diagnostic tools, a UK equivalent to the US Collaboration Prize scheme and a Mergers and Acquisitions Fund to provide both capital and expertise for prospective mergers.
We’re keen to hear feedback from you on the Good Merger Index – contact us here.