This week we at Eastside Primetimers released our Good Merger Index 2014/5, reviewing merger activity among charities and housing associations. The largest charity mergers saw Breast Cancer Campaign and Breakthrough Breast Cancer join forces and Addaction take over mental health provider KCA. Leisure trusts also featured strongly and were involved in three of the top 10 deals as a response to widespread funding cuts from local authorities.

Overall, we were struck by how few mergers there still are, despite a difficult financial environment and increasing debate on the subject – 129 charities carried out mergers, out of well over 160,000 on the charities register.

Worse still, it appears many mergers are effectively ‘rescues’ with unfavourable terms. Fifty-three per cent of those charities merging into another organisation were loss-making, and 62 per cent of deals involved a charity losing substantial autonomy. We also know that some charities that failed made last-ditch attempts at merger (e.g. BeatBullying briefly sought a buyer).

This shows trustees aren’t proactively exploring merger and giving their charities space to think strategically about the future. Boards should look objectively at their charity’s position in an increasingly volatile sector, and plan in the best interest of beneficiaries – could we maximise our reach and impact by joining forces, and indeed are our services better housed elsewhere?

The Charity Commission has a major role to play here. As NPC noted in their pre-election manifesto, commission regulations currently “direct trustees to focus more on the survival of the charity than on achieving the charity’s mission”, effectively reinforcing the instinct many trustee boards already have towards survival for survival’s sake. Instead, the Charity Commission should be taking a lead role in behavioural change, scrutinising charities on their achievement of mission and impact.

Some charities already get this, such as Leatherhead Youth Project and Liquid Connection – these Surrey charities merged after an initial partnership, explaining that “we began to realise that the young people couldn’t tell that we were two different organisations”. This is a reminder that for beneficiaries the presence of vital services is more important than how they are badged.

Here are four proposals for how trustees can bring merger discussions into the sector’s boardrooms:

1. Boards should discuss merger regularly: these conversations don’t have to result in action to be worthwhile. Actively debating the option as a matter of course will help test unspoken assumptions about your charity’s direction and purpose.

2. Think about the best fit for your charity: what types of partners, and partnerships, might your beneficiaries gain from? Are there gaps in your approach and provision that could be filled, or a specialism that could be reinforced?

3. Consider which red lines really are red lines: you should rule little out until you’ve had exploratory conversations with potential partners – personal chemistry means that some options will turn out better than they looked on paper when you meet. The important thing is not to declare issues like brand to be ‘non-negotiable’ too early

4. Beware the myth of uniqueness: the not-for-profit sector is rife with duplication (over 700 charities exist for blindness, 900 for the forces, 500 for animal welfare etc). Some have good reason to exist – a particular sub-specialism or good local links – but not all. Trustees can’t be afraid to ask which one their charity is

We need a sea-change in charity leadership if the sector is to face up to its formidable financial and commissioning challenges. Trustees must lead on this, but we need the Charity Commission to give them this direction and then hold them to account as they do so.

Richard Litchfield is CEO of Eastside Primetimers

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