Considerations for a Charity Merger

There are over 168,000 registered charities in England and Wales alone and the majority are relatively small. Surely we could be more effective, make better use of charitable funds and assets and provide better services for beneficiaries with fewer charities or other forms of collaborative working.  Yet speak to anyone who has been involved in an attempt at a charity merger and you’ll hear that it’s far from plain sailing: the merger explorations mean huge investments in time and energy and the majority do not succeed.

 

So here’s a brief heads up to help you grasp the likely scope and implications of exploring a charity merger. As you get into the detail you will need to take further advice from specialists in this field. This is not a chronological list, some of the activities can happen concurrently.

 

  • As a Christian organisation pray throughout the process.

  • Ensure confidentiality is understood by both parties and sign a confidentiality agreement.

  • Check Charity Commission advice at the outset (see signposts below).

  • Recognise that you will need to take legal advice.

  • Identify the added value for your organisation and the other party of such a merger and also consider what the downsides could be.

  • Consider other ways of collaborative working, either as an interim step or as an alternative to a merger.

  • Check mutual understanding of each organisation’s vision and mission, current and planned strategy, programmes and activities, organisational values including any doctrinal basis for Christian charities.

  • Check both governance documents, particularly in relation to permission to merge and consistent aims (objects) of both organisations.

  • Clarify the expectations of the trustees of each charity, including the anticipated process and timetable for the exercise.

  • Consult the Charity Commission’s guidance including identifying any specific issues in relation to the status of each organisation.

  • Appoint a merger team from each organisation and confirm the scope of their delegated authority to negotiate. You may also consider appointing an independent facilitator.

  • Undertake a disclosure and due diligence exercise to include:

    • Governance documents

    • Annual accounts including balance sheet

    • Staff contracts and employment history, suitably anonymised

    • Leases and/or other restrictions on property

    • IT and systems

    • Relevant legal contracts and agreements

    • Any other financial liabilities (including pensions)

    • Current funding model

  • Prepare an action plan for practical aspects of the merger:

    • Staff, including communication with them

    • Office/property arrangements

    • IT systems

    • CRM/Database and GDPR implications

    • Bank accounts

    • Stakeholders (including members, if you have any)

    • Vision, values and strategy

    • Internal and external communications

    • Future name and branding

    • Registration of the new entity with the Charity Commission (if required). NB A merger could involve a transfer of assets from one existing charity into another existing charity, which may be easier than setting up a completely new entity.

  • Undertake a risk assessment for the exercise.

  • Draft non-binding terms or heads of agreement for a merger for consideration by the trustees of both charities and as appropriate by the Charity Commission.

  • Obtain appropriate permissions to proceed.

 

Signposts

https://ep-uk.org/publications/charity-mergers-good-merger-guide/

 

Author and Copyright: Helen Calder 2019.

 

Peer reviewed by Caroline Eade.