The following was written by Eastside Primetimers’ CEO Richard Litchfield for the Charity Finance Yearbook 2014.

When two organisations decide to come together the journey can be long, expensive and fraught with danger. There are no absolutes here, each case must be assessed on its own merit, but there are some important steps to take to ensure the right deal is done without causing a lot of unnecessary hard work and heartache.

Reactive mergers are poor mergers; and mergers that are managed too slowly often lead to poor outcomes. Too often a Chair or CEO will have a private chat to a friendly organisation, follow this up with a bit of “due diligence” designed to come up with the correct answer, and wham! Two unequal partners, a clunky structure, and a marriage based on incompatible values.

And we often see mergers that could be done in months, take years. Extended merger processes, disproportionate to the size of the organisations involved, carry great risk and add significant burden to senior management and Boards.

The good news is that risks associated with non-profit mergers can be greatly reduced when organisations:i) adopt a proactive merger strategy to find the right partner, and ii) have a clear and proportionate approach to implement the merger.

Inertia is the biggest risk to any successful merger. The tendency of organisations to proceed in a straight line until gradually grinding to a halt can easily be avoided simply by adopting a proactive merger strategy.

Before you start, be very clear about what you want to achieve, and then thoroughly explore your options. Do not settle for the first partner who comes your way, and stay open minded about other forms of collaboration. Your service users may gain as many benefits from entering a Joint Venture, Alliance or Consortia, as from a merger.

Ask yourself the following basic questions. • Where are we going • What are our objectives? • Can a partnership get us there quicker? • Are we being proactive to find the right partner? • Is this in the best long-term interests of our Service Users? • Do we share the same values?

If the answers are yes, move on to planning and Due Diligence. This is often easier in the charity sector because there is typically no money changing hands. After an initial assessment to make sure there are no ‘show-stoppers’ (such as pension crystallisations), and the governance documents of both organisations permit merger, you can progress to Due Diligence proper. You can sum this up with two questions: “What is going to make this deal work?” And “How do we test that?” The answer to the former will take some thought, while the latter is frequently a matter of experimentation.

Before getting married, a couple can do a lot worse than take a two-week holiday together. If they survive a fortnight in the Algarve, they can survive pretty much anything life throws at them. So before taking the plunge with a merger, try the relationship out. Run a small joint venture to see how both sides react, how they interface, how problems are solved and how compatible you really are.

Assuming you pass the Algarve test, hone your vision of the merged organisation by creating a clear and compelling narrative. This will serve you well as you are likely to repeat it at many meetings during the process.

Use specialist advisers to help you refine the business case and advise on Governance, Branding, Management, Staffing, Planning and Budgeting. Let them answer the difficult questions – this is what they do best – and leave yourself clear to focus on influencing and negotiation.


Prepare to address the most common risks, barriers and objections head on. Some of the most common challenges you will face are:

Building Trust: If trust is not present from day one, it must develop very quickly. Encourage everyone to be open about any concerns right from the start. Values and Cultural differences: If you do not share the same values, the deal is likely to be problematic. Understand each other’s culture and tackle fundamental differences right from the start. Create a new culture based on the shared values of the two businesses and decide what you need to do for the culture to survive long term.

Fear of losing identity and independence: People can be very uncertain, especially at the start, so create an agreed and compelling shared vision to act as a guiding light throughout the process. Once the merger has taken place these concerns melt away very quickly. Self-interest of Trustees and Staff: Do not underestimate peoples’ personal stake in the organisation. Identify senior peoples’ personal and emotional attachments and discuss how to mitigate these up front. Your specialist advisers can help you here.

Failures in planning and process: Create a realistic and achievable plan and process, and keep it under review. If momentum is lost the process can quickly become destabilised. Make sure there is a compelling business case: The merging organisations must have complimentary or similar activities, which result in added-value when brought together.

Opposition to the concept: Engage your most senior and influential opponents into the process as soon as possible. They will not go away, so need to become converts.

Cost and Resources: Set a realistic budget, time and staffing plan. Ring-fence the resources necessary to plan and implement the merger.

Leadership: Appointing the CEO at the end of the process creates two distracted CEOs during the process – CEO’s who should be focused on managing the merger. This leadership gap is one of the common reasons deals fail, so it’s better to have one highly motivated CEO to drive the project through right from the start.

Inability to integrate systems: Integrating systems and processes post-merger is crucial. Failure means you are unlikely to realise the full benefits of the merger.

Poor appointments: Don’t fall into the trap of appointing internal staff to positions that are unsuitable. Your specialist adviser should make the difficult decisions. They will be more dispassionate and pragmatic.


Mergers can be fast moving and confusing. There’s a lot to manage and communicate, while trying to keep people focused on the day job. Here are some ways you can make the process as painless as possible.

Involve the Board Chair: Early discussion is essential. Unless the board chair is willing to discuss a potential merger there is little chance of success.

Inform other Trustees: Agree with the Chair how and when to involve the trustees. Make sure you have the vision and narrative in place, to secure interest and confidence.

Elicit Trustees’ concerns: Both boards must be fully committed. Get an early feel for the issues and concerns and make sure risks and deal-breakers are fully understood by both parties. Discuss these and set up a risk register from the beginning.

Be clear about leadership: Nobody should be in any doubt about who is leading, and everyone involved needs to be clear about the terms of reference of the joint steering group of trustees or other management teams engaged in the process.

Address capacity and cost issues: Assess the time and funding implications, as trustees will want to know this. Budget for specialist advice and draw on it at key moments to minimise the risks.

Establish a joint steering group: Mergers involve a lot of work, and those leading the process must have the skills and energy to maintain momentum. Involve supporters and potential naysayers in the steering group, to ensure relevant concerns are aired and addressed. Make sure the communication process keeps Board members not involved in the steering group informed.

Involve Specialist Advisers early on: Particularly helpful for addressing complex, awkward or politically charged issues, you will need specialist advice on mergers and possibly on HR, Pensions, IT, and Regulation.

Be proportionate: Trustees will be concerned about risks, but keep these in proportion. Compare the time and energy involved in the merger to the benefits you plan to accrue.

Future governance arrangements: There will be winners and losers, but do not get drawn into protracted decision making arrangements for purely short-term tactical reasons.

Celebrate past achievements: Celebrating past successes of both organisations is a good tactic to keep people onside. It reduces resentment and creates less resistance.

Reassure leavers about continued service provision: Reassure those on their way out about the continued commitment to the services they particularly valued.

Einstein’s advice to make things “as simple as possible but no simpler” is a salutary reminder for the charity Board thinking about a merger journey.

A merger needs to be well managed, with clear leadership at Board level and executive support right for the start. It needs a clear project plan, regular engagement and communication to key stakeholders and a due diligence process that is both comprehensive and proportionate.

Make the merger a project for a suitably experienced trustee with a small, empowered decision-making group from both sides, and make use of specialist advisers. Mergers can be fast moving and unpredictable. They require clarity of purpose, flexibility and a willingness to make fast decisions. You probably won’t have the luxury of using quarterly board meetings for decision-making, so think carefully about a process of governance that aligns with your organisation.

And if you don’t have the right trustee in place, recruit one.

Finally, remember that inertia is as big as risk to your organisation’s survival as it is to a merger. Perfectly reasonable men and women do not oppose progress because they disagree with progress. It’s because our nature is to find comfort in the place we are right now. As the funding climate changes dramatically, the not-for-profit sector has no option but to find new ways to do things.

The private sector always seeks to grow in two ways, organically and by consolidation. As not-for-profit leaders we should stir our people out of any inertia and invite them to explore the possibilities of transforming our organisations through collaborative growth.

Eastside Primetimers

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