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Thinking about merger in 2020

This blog is complemented by the perspectives of four practitioners who have led merger processes.

IVAR has learned much over the last two decades about what makes a merger successful. How much of this can applied in the current circumstances?

23 years ago, as chair of an alliance of regional HIV charities, I asked colleagues a simple question about our futures: “If we were to design a voluntary sector response to the challenge of HIV and AIDS from scratch, how would we organise ourselves?” The answer was a single, national organisation. A vehicle with the potential to achieve two essential public benefits: enhanced equity and quality of services; and a louder and more powerful voice with policy-makers and funders. 18 months later, four of our organisations merged into Terrence Higgins Trust, followed a year later by London Lighthouse and, over time, others.

This approach was rooted in a belief that organisations are a means to an end, and that there might be a better way of meeting charitable objects.  We know that mergers entered into out of strategic choice seem most likely to yield benefits to beneficiaries (e.g. more and better services) and organisations (e.g. greater influence). However, even this ideal kind of merger requires time, money and an element of risk-taking: after all, mergers are an inexact science. For all the due diligence in the world, they always require a leap of faith.

Through the work that we have been carrying out over the course of the last few months, tracking and supporting the response of smaller VCSE organisations to the Covid-19 crisis, we have observed their extraordinary resilience, creativity and integrity. This is a precious resource and needs to be understood, valued and nurtured. At the same time, we recognise that, for a myriad of reasons, the possibility of merger is beginning to loom large for many of these organisations. Leaders are feeling frustrated, worried, and unsure about how to shift gear out of crisis and into recovery. Faced with daunting challenges – funding cliff edges and sky-high demand for services – some are beginning to look at merger as a way of continuing to deliver for their beneficiaries.  The challenge is that the conditions and resources for careful, constructive mergers are less likely to be in place at the moment: organisations are feeling anxious, and the space for thinking creatively about the future is squeezed.

So, when thoughts turn to merger, how can leaders respond in ways that feel authentic and useful?

If we strip the insights and guidance of Thinking about Merger  down to their bare bones, five things stand out:

 

  1. After the 2008 financial crisis, we found that organisations were more likely to survive and, over time, thrive if they were open to asking themselves fundamental questions such as: Who are we? What are we trying to achieve? What is the best vehicle to make that happen? At a moment of crisis, there may also be an opportunity to focus minds and bring the possibility of merger into discussions about the future. 
  2. For organisations with their backs against the wall, the proposition may be: the preservation of something versus the gradual disappearance of everything. But even if you enter merger explorations on the back foot – preoccupied, say, by survival rather than growth – it’s still important to identify and then pursue a positive agenda about change. Keeping a service going might not feel like the most compelling vision, but that may be the vision that is possible right now.
  3. However bleak your prospects, merger may not be the answer. In addition to a shared vision, you need a feel for the fit with your potential partner(s). Do you have enough in common, enough shared values, to trust in the potential of a merger to work? There is no shame in concluding not. We have written before about the importance of having an ‘awareness of mortality’. For organisations whose aims are no longer appropriate, or for whom sources of public funding on which they were overwhelmingly dependent no longer exist, or who have not been able to make a transition to a new environment or find a sustainable alternative business model, it may be more responsible to close down rather than compete with others or struggle on, hand to mouth. Or there may be steps short of merger that can at least preserve some of what has been achieved – such as hiving off a non-loss-making service, or simply much closer collaboration.
  4. Under normal circumstances, we would encourage possible merger partners to think about possible deal breakers upstream. These might include questions of identity (including name and brand), location, service model, and staffing. Without the luxury of time, or resources to support a staged process, it will still be important to articulate and be mindful of what each partner is not prepared to give up or take on. Without, at best, addressing these ‘red lines’ or, at worst, putting in place plans to do so, the risk of failure will increase.
  5. Finally, there is one key deal breaker which will need to be resolved as early as possible in the process: leadership. Here, as with all design considerations in a merger, form needs to follow function. In other words, what kind of leadership will the new, merged entity require to give it the best chance of succeeding?

IVAR and Bates Wells are working on a new edition of Thinking about Merger to support charities navigating the particular challenges presented by Covid-19. Sign up to our newsletter and be the first to know when this is released.

The key features and stages of merger are outlined in Thinking about Merger, and described in more detail in the Locality and TACT case studies.

Merger: Practitioner perspectives

This blog shares four perspectives of practitioners who have led merger processes. We asked them to share their reflections for other leaders contemplating merger in the current context.

Laurie Rackind is CEO of JAMI (Jewish Association for Mental Illness), which merged with Jewish Care in 2012:

Isolation and distancing may be great weapons in the fight against Covid-19, but they are far from ideal concepts for those already experiencing significant mental health problems. Organisational isolation and distancing are just as unhelpful when responding to the pandemic, and the current challenges are causing many charities to contemplate closer collaboration or merger.

Where the drivers behind mergers are the needs of charities’ beneficiaries, such collaboration should be applauded. For many, though, the drivers will be institutional or professional survival: this is understandable, but may not be enough to see organisations through an inevitably challenging process. Whatever the context, improvements for beneficiaries should always come first. 

Jewish Care and Jami came together seven years ago with a very simple vision – a single mental health service for the Jewish Community. Our challenge was to make one plus one equal more than two. In terms of income, one plus one now equals four. But most importantly, in terms of output, one plus one now equals nearly seven.

During the pandemic, Jami has been able to adapt and respond to the needs of the community with agility, creativity, innovation and speed. It is highly unlikely that, as two separate organisations, we could have coordinated our efforts to the same outcome.  This is thanks to a collaboration which was initiated not by a crisis, but a simple vision of more effective services.

Society is full of vulnerable people who have been isolated for many years. Arguably, this is also true for many of our charities. As lockdown is eased, let’s hope that, as a society, we can all thrive by rising from isolation together.

 

Ben Hughes was CEO of bassac which, in 2011, merged with Development Trusts Association to form Locality:

I remember being asked by a civil servant, once news of our ‘merger exploration’ was out, which model we were using. At the time I blagged it given they were a significant funder, seemingly wanting surety that all was OK. In truth, of course, I had no model up my sleeve. I had little idea – beyond a sense of creating something more resilient to the onslaught of looming austerity – of exactly where this process might take us.

But, of course, mergers aren’t about deciding on a tidy plan. People aren’t machines, and merger advisers aren’t cartographers. It’s a fluid process and one I found took time to get used to; step by step process working is different! I had to trust, a lot. But the collegiate support I got from our tight knit group of chairs and CEOs gave me invaluable confidence to navigate every step of the journey. Helped by a clear and strong process, I felt contained and able to raise difficult issues.

For me, though, there was another, important element. I was clear from the outset that I didn’t want to be CEO of the new organisation. With 11 hugely rewarding years behind me, this was my time for change. This stripped out personal competition and tensions between creating what I’d want to lead, and what was right for the organisation.

Was there any loss? Bassac had a special quality. Our quirky settlement members, impossible to pigeonhole; the slightly maverick network of characterful individuals, achieving remarkable things in their way. So yes, there was loss – of that movement; and for me too, in sidestepping the excitement of the new creation and in letting go of the role I’d inhabited for all those years that had given me so much. But like parenting, doing what you know is the right thing, and seeing the flourishing consequences, brings its own, unique rewards.   

 

Leah Swain is CEO of Community First Yorkshire, which was formed out of a merger in 2017 between North Yorkshire & York Forum and Rural Action Yorkshire:

Covid-19 has created all kinds of local heroes – NHS staff, social care teams, and key workers keeping going utilities, logistics, retail. Let’s add to the list small, local charity Chief Executives who are on the frontline of community support for so many vulnerable and isolated individuals and their families. I’ve watched them demonstrate their own special super powers – the power to give laser-like focus to changing overnight to find, reach and support hundreds of people needing food or company. The ability to transform new volunteers into efficient delivery teams in days. But they also seem to have the most frustrating power of invisibility. Invisible to national bodies who parachute in assuming there is no local support, invisible to the MPs calling for local volunteer infrastructure, invisible to Government departments with limited understanding of the incredible small charity ecosystem that exists.

Even as these small charity leaders continue their hard work totally focused on their beneficiaries’ wellbeing, we know many are starting to question how long their reserves will last when their previous income plans are unlikely to recover. And that’s where that frustrating power of invisibility might have a use after all.

The funding environment is going to get tougher. Many charity leaders will have to actively consider mergers if they are to ensure the valuable services they provide in so many communities will continue after their own funding runs out. Contemplating a merger is hard – you feel you are losing the organisation you have poured every part of your soul into. Boards are loathe to mention the M word to the Chief Executives they value and respect – knowing a merger may mean there is no longer a role for them. It’s tricky.

When my Board started to explore merger they found it much easier to know that both existing Chief Executives did not expect a job in the new organisation. We both provided guidance and support in the background, but made sure we gave our Boards clear permission to put us, and our current way of doing things, to one side. The success of mergers depends on a clear vision for the charities’ beneficiaries, looking beyond current staff and structures. Mergers can open new possibilities – different, but potentially as powerful at supporting local communities.

Many small charity leaders will need to put on their cloak of invisibility and give Trustees freedom to contemplate merger – to move on without them in the picture.

 

Joanna Holmes is Co-Director of Wellspring Settlement which was formed out of a merger in February 2020 between Barton Hill Settlement and Wellspring Healthy Living Centre:

Merger on 1st February 2020 and Covid-19 in March is quite an ask of any organisation. However, we are more than surviving, we are doing some quite extraordinary things. This last two months have shown up very distinctly the underlying issues we knew we had to deal with and the differences in organisational culture. We had thought we might have a year to sensibly integrate all staff and systems as a new organisation, but following the extraordinary Covid19 period – in which we have restructured to provide a community hub with all other services switched to operating from home and phone – we now have to sort them out much more quickly.

The main learning for me is that having one common underlying driver, which is deeply held, gets you through what could be deal breakers or show stoppers. In our merger, this was a strongly held belief that two similar size organisations in one area serving the same community can do this better for the community by being one organisation. In difficult situations everyone can return to this and regroup to move forwards again.

The second thing is that mergers are never easy for lots of reasons. I have had to face the worst things about myself and the organisation, as well as the best. This isn’t too pleasant, but is useful in the vein of: “if it doesn’t kill you, it will be the making of you”.

Thirdly, we took a long time to work through the feasibility stage and, with hindsight, if we had done this more quickly we would have been further ahead with integration now. We also found that the costs of merger are much higher than is recognised, but this is widely known.

I think all organisations should consider merger as an option. And while it isn’t simple or easy, neither are the issues we are trying to tackle in our communities or with the people we are here to benefit. Extraordinary times demonstrate the need for extraordinary responses. Merger could be part of this. It’s not always easy, but  if it’s the right thing to do, it’s the right thing to do.

 

This blog is complemented by a practical piece on Thinking about merger in 2020 from IVAR Director, Ben Cairns.