The era of the merger – could it make for a more collaborative sector?

With the pandemic taking its toll, we are in an era where mergers and integrations have increased at pace, and trustees are having to put aside any focus on protecting and promoting their organisations themselves.  Fundamentally, charities exist for charitable purposes and trustees must focus on the best way to support those purposes. Charities may need to restructure, collaborate or fully relinquish control to reach the needs of their beneficiaries and to continue their purpose, some with the realisation that they can no longer do it alone. We explore this sharp divergence between the interests of beneficiaries and the charity itself, and dare to hope for the future – a more collaborative and efficient sector for the good of all it serves. 

It’s common to talk of acting in the best interests of a charity and to sometimes pass over the distinction between the good of the organisation and the best delivery of its purposes.  It’s not just terminology that leads us to protecting the best interests of organisations we steer, it is instinctive within us to push forward well-laid plans, hone skills, cultivate pipelines, develop reputation and protect brand, to do the very best the organisation can do for its beneficiaries. 

As a charity lawyer working for a long time in the sector, I have never seen the distinction so starkly as when we worked with a famous high street brand’s charitable foundation in 2016. The foundation’s then trustees resisted a funding deal which they felt would have challenged its ability to continue the radical projects it supported at the cutting edge of its charitable purposes. The foundation turned down the deal; all funding ceased; and, as the trustees anticipated, the foundation was forced to close, after spending residual funds effectively for the charity’s uncompromised purposes. A poignant example of putting purpose before organisation: however painful, this is the right principle to follow.

Although merger situations differ in important ways, the challenge of putting purpose before organisational loyalty is the same. Even with certainty that a merger will ensure effective and continuing impact, the challenge is to agree to handover the organisation’s activities (and all of its assets and capabilities), and this often involves difficult decisions. It is not helpful that these are often required in times of financial distress. I found these astonishingly difficult decisions to make – experiencing this first-hand at the beginning of the crisis when the pioneering and valiant social enterprise of which I had only recently become a director was plunged into serious difficulties and forced to merge or wind-up. The bright flame that had been lovingly stoked was extinguished as the company was subsumed: its identity was lost and its strategic future was taken out of our hands. It was a difficult decision – a head over heart decision and one that felt contrary to instinct, even as a relative newcomer. 

Although the human element brought by the board is so important to the organisation’s success, the board is charged with taking a dispassionate and strategic decision for the public benefit in the face of collaboration. And arguably there is an obligation to consider merger and collaboration as part of its ordinary strategic approach to advancing its purposes, rather than simply as a last resort in financial distress. Bigger is not always better and small or very local can be exactly what is needed to deliver impact in the best way, but without expending resources unnecessarily, we should draw on the spirit of community and alliance in this otherwise separated and restricted society. A putting together of heads, a pooling of resources and a gathering together of forces may be the best way to stabilise, revitalise or step up the organisation’s impact. A healthy curiosity for potential opportunities and mission hygiene will hopefully go a long way.

It is instinctive to nurture togetherness at a time when we are distanced in so many ways, but the challenge is to continue to do so when the pandemic abates.

The law and practice referred to in this article or webinar has been paraphrased or summarised. It might not be up-to-date with changes in the law and we do not guarantee the accuracy of any information provided at the time of reading. It should not be construed or relied upon as legal advice in relation to a specific set of circumstances.

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