Charity Bites: Mergers And Other Forms Of Collaborative Working

Mergers are becoming increasingly prevalent in the voluntary sector, reflecting current trends in public sector procurement and the economy as a whole. But why are they seen as attractive in responding to these trends? How do they work? And could this be the right way forward for your organisation?

Mergers - a rising trend

An increasing number of third sector organisations are looking to mergers and other forms of collaborative working as a response to the bundling of public sector contracts into larger packages. Smaller organisations are finding it increasingly difficult to compete for such contracts in their own right, but by joining forces with other organisations, they can access a range of benefits such as:-

Expansion of range of services; Expansion of service area provision, e.g. in terms of geographical scope and categories of beneficiaries; Improved service delivery; Unique selling point and competitive advantage; Efficiency savings and better use of resources; Knowledge and information sharing; and Sharing of risk in relation to new projects. Demystifying the process

It is no surprise then that so many organisations are opting for this route, but for some the process can seem complex and daunting. However, with the right legal support, it is still a very attractive option for a large number of bodies looking to increase their competitiveness, and for directors/charity trustees to find solutions which work in the best interests of their service users. The first step would be to conduct a feasibility study, followed by undertaking due diligence. This term is used to describe the investigative steps taken by the relevant organisations to ascertain that a merger is in the best interests of their organisations and beneficiaries; it is the process by which each organisation finds out about the legal and financial position of the other, including liabilities - in terms of contracts, leases, employees and pension arrangements. This is particularly important for the transferee organisation to enable them to find out exactly what they are taking on, and to avoid any unpleasant surprises! It is also a good opportunity to investigate strategic and operational structures (e.g. organisational culture, IT systems) to check that the organisations are compatible. Once both sides are satisfied that they can work together and that this is in the best interests of all involved, a decision would then need to be reached on which form of merger would be...