Will tough times mean more charity mergers?

Howard Lake | 18 December 2008 | Blogs

Earlier this month William Foster and two colleagues from the US nonprofit consulting group Bridgespan published an interesting article in Chronicle of Philanthropy on mergers in the nonprofit sector. http://www.bridgespan.org/LearningCenter/ResourceDetail.aspx?id=2450
Their research shows that mergers and acquisitions are as common in the nonprofit sector in the US as they are in the commercial sector. But it is mostly smaller charities which are merging – mergers between large charities are rare. When mergers do occur they tend to be for opportunistic reasons – financial problems or a CEO moving on.
Anecdotal evidence suggests a similar situation pertains in the UK. The creation of CRUK and Age Concern and Help the Aged’s impending merger are notable for being so unusual.
Yet growth through mergers and acquisitions can achieve significant scaling of impact, pooling of knowledge and reductions in overhead. This is demonstrated by the Arizona Children’s Association case study presented in the Bridgespan article.
Foster and his colleagues suggest two main reasons why mergers between larger charities are rare. First is the lack of a profit motive which is the primary driver of M&A activity in the commercial world. Second is the dearth of matchmakers.
Funding pressures over the next few years might provide a spur to more merger activity. What could really help though is for someone to start providing the encourgament, advice and support needed by charities wanting to explore mergers.
How long before we see an agency like Think Consulting or The Good Agency start to offer M&A advice? There are plenty of people with commercial M&A experience looking for work.

About Howard Lake
Howard Lake is consultant editor of UK Fundraising. He founded the site in 1994 and successfully sold it in 2022. As director of Giving X Ltd he is exploring growing giving on a massive scale. He is the founder of Fundraising Camp and co-founder of GoodJobs.