It is vital that any merger between organisations enhances the contribution made to beneficiaries and meets essential criteria
Many third-sector organisations are actively considering a merger with others. This is inevitable and such moves can produce positive benefits.
As a trustee of an organisation currently considering a merger I believe that it is vital that organisations, and in particular their trustees, approach possible mergers with very clear objectives and have clear criteria based on those objectives against which to evaluate any emerging options.
These objectives must be mission-led but must also be based on hard business and financial considerations – heart cannot be allowed to overrule sense. Financial due diligence and modelling has to be at the heart of any merger discussions from the very beginning.
Certainly, this is how navca and Community Matters are exploring a possible merger. This possible merger is being discussed this week at the navca AGM.
In my view, it is imperative that any merger should enhance the contribution made to beneficiaries and be compatible with the missions of the organisations involved. Defensive mergers developed to buy a few more years for one or more of the participating organisations are probably – though not always – doomed to failure. The risk of the latter approach is that stakeholders feel a sense of reluctant inevitability and have little enthusiasm for the exercise, which is never a good basis on which to move forward.
Of course, it would be naive to pretend that the current period of austerity with reduced public sector financial support and lower volumes of charitable income are not going to be drivers for change.
However, my personal experience of the private, public and third sectors, is that mergers are most effective when there is a shared vision for the new organisation and the merging bodies complement each other so that the new body will be more effective than the merging ones – e.g. have a louder and less fragmented voice, or provide a greater range of services, or have access to specialist expertise that no single original organisation could employ, or have a greater reach in terms of geography and/or users and members.
Key questions must be asked first:
• Do we have the capacity to undertake the merger negotiations?
• How are we going to engage members, beneficiaries and staff in the decision making process – this is essential?
• What might key external stakeholders including funders think?
• How do we ensure that egos and vested interests do not distort the process and decision-making?
• Will this be a merger or a takeover?
• Might an alliance be preferable to a merger?
As a trustee, I would test any proposal by seven key criteria:
• Will our ability to fulfil our mission be greater than it is now?
• Do we and our potential partner have a common values base?
• What will be the key strategic objectives of the new organisation and do these reflect and strengthen our existing ones?
• Will this enable us to better meet our members and beneficiaries needs and aspirations?
• Will we have a louder and more coherent voice to government, local authorities and others?
• Will the new organisation be financially sustainable – both short and long term?
• Can we agree effective governance arrangements that will offer protection and opportunity for current and future members?
Whilst it is important to consider matters such as staffing, office location and even the name of the new organisation – these have to be of secondary importance to trustees who are acting strategically in the interests of their charity and its mission.
In summary, any charity merger has to be mission-led and mission-based; and must secure the long-term fulfilment of the mission.