The number of charity mergers has fallen amid a ‘reactive rather than proactive’ approach, which is stunting the sector’s overall development, research has found.
The annual and sixth Good Merger Index this year revealed mergers remain a minority activity within the sector and are still seen as a ‘last resort’ due to 'cultural and people challenges'.
Eastside Primetimer’s annual review of not-for-profit mergers found just 58 mergers took place in 2018/19, compared to 81 in the year 2017/18.
The total number of mergers involved 116 organisations – 0.07 per cent of the 168,000 charities registered in the UK.
The total income of the 116 organisations was £374m and 94% of this value was concentrated amongst the largest 20 mergers.
However, the report said this does not reflect a dominance of larger charities in merger deals – 54% had an income of under £1m; 23% an income of between £1m and £5m and 10% ranged from £5m to £10m.
Eastside Primetimers said ‘significant’ structural barriers to mergers continue to be a major factor in the lack of mergers taking place across the sector, including a ‘systemic lack of knowledge and awareness of the merger processes’.
The report said merging generally tends to be a much more reactive process than proactive due to limited funds being made available to support mergers, as well as an absence of motivation or incentive for boards to consider merger unless as a result of financial pressure.
“This year’s findings continue to demonstrate the reluctance of the sector to include merging in its strategic toolkit which is why we have included a qualitative look at past merger activity to support the quantitative data and hopefully broaden the conversation.,” Eastside Primetimers director, Dave Garratt said.
“Insights of charity leaders from recently merged organisations and infrastructure bodies has been both consistent and revealing and will help to frame the debate that we believe is necessary to help the sector to develop.”
New sector ‘hotspots’ of merger activity in this year’s Index included health and social care broadly (53%), intermediary (13%) and justice (12%).
The largest deal to take place over the 2018/19 period was the merger between Breast Cancer Now and Breast Cancer Care, which was worth a total of £46.7m.
This was closely followed by the merger between Blenheim CDP and Humankind, which was worth £40.9m combined.
To read the full report, click here.