Strength in numbers: Why are organisations joining forces?

Over the past year, our education and charities teams have experienced a significant increase in the number of enquiries they receive from charities and education providers seeking to merge or otherwise engage in joint ventures or collaborative working with others.

Good Merger Index 

The Good Merger Index published by Eastside People identifies 63 mergers involving 131 organisations across 2023-24 in the charity sector alone, a 31% increase in recorded mergers compared to the previous year.  What we are seeing in practice reflects a broader trend across the country.

Samantha Pritchard, partner and Carla Boaks, solicitor, explore the reasons for this increase.  

Why are mergers increasing? 

Financial challenges

In the current climate of falling income and rising operating costs, financial challenges continue to be one of the primary drivers for our clients in  pursuing merger opportunities.  We are seeing larger organisations stepping in to continue service provision where a smaller organisation can no longer make ends meet, or where funding dries up, or a continual deficit eats up remaining reserves.

The Index supports this, revealing an increase in the number of organisations turning to merger to address a financial deficit, regardless of size.

Strategic growth and diversification

However, we are finding that finance is merely one consideration for a merger, and the opportunities for strategic growth and diversification play a key role.

We are seeing larger organisations coming together to expand their geographical reach, to achieve economies of scale, or to respond to changes in funding streams arising from the creation of combined authorities.

Through conversations with our clients, it seems clear that for many a decision to merge is put forward as a proactive strategic step to achieve greater economic resilience, or to transform their service offering, rather than purely being the result of financial necessity.  

The next step to collaboration

We are also seeing mergers arise organically as a next logical step following long term collaboration between equal partners, with merger being seen as a positive progression for both organisations, ultimately helping them reach their common goals and providing greater benefits to their beneficiaries.

Succession planning

Whilst less common, we also see organisations turn to merger where their founder wishes to retire and no suitable alternative to running the organisation independently can be identified.

What does the future hold?

Interestingly, the Index shows a significant increase in the number of independent school mergers over the past year. The Index speculates that this is due to the impact of VAT, the rise in cost of living and independent secondary schools taking over their feeder schools.  This reflects what we are hearing from our independent school clients.

We expect merger activity to continue, whatever the reason for it, as charities and education providers recognise the merits of coming together to deliver services for their beneficiaries.

Need advice?

We regularly advise charities and education providers on the types of mergers available and support them through their chosen path to merge.

If you are considering a merger, we recommend that you seek advice at an early stage. This will ensure that any hurdles to the merger can be identified and remedied early, and the necessary steps to achieve a successful merger put in place from the outset of the process.

For further information on charity mergers, or if you have any charity law queries in general, contact Samantha using [email protected] / 0191 211 7905 or Carla using [email protected] / 0191 211 7825.