Deciding to merge

This page highlights key questions to think about before making the decision to merge.

A merger is usually raised by an organisation's chief executive or trustees (members of the board or management committee). It is the trustees' role to make sure their organisation acts legally and they take final responsibility for the decision to merge or not.

Trustees must act in the best interests of beneficiaries, after weighing up the reasons for merging and:

• other benefits
• costs
• barriers
• risks and other options.

It is not always possible to merge, and finding a partner in the right time frame may not be possible. As a result, trustees are also responsible for making alternative plans. For some, these may involve closing and transferring the remaining assets to another charity with similar objectives.   

Whilst ultimate responsibility to merge generally lies with the board, consultation can help to get an informed view. This will help maintain the goodwill and engagement of supporters, staff, members, funders and other stakeholders.

If the organisation transferring its assets is a membership organisation, the approval of its members should be formally taken during the merger process. Consultation can help to deal with any opposition early on.

You must be sure a merger will help you achieve the objectives of your organisation. Your potential merger partner/s should have compatible objectives to yours (as set out in the governing document) so that a merger allows you to continue current work.

If the objectives of the receiving organisation in the merger are narrower or wider, assets may have to transfer on separate trusts or as restricted funds, only to be used for the objects of the transferring organisation.

Alternatively, the objectives of one or both organisations can be changed (usually requiring Charity Commission consent) so the transfer of assets can take place on an unrestricted basis.

You will need to check whether your governing document includes an express power to merge or a dissolution clause.

Often, a merger can be achieved under a very generally expressed power in the governing document. If there is no such power, it should be possible to add one through an amendment.

In some cases, you may need to seek authorisation from the Charity Commission if your organisation is a charity. You may have an obligation to consult your members about a proposed merger.

Merger should only go ahead if it will mean more or better services for your beneficiaries or the continuation of existing services which would otherwise be lost.

Consider whether the organisations make a good match in terms of:

• vision
• values
• culture
• governance arrangements
• funding sources
• activities.

You could explore this in different ways such as open dialogue, due diligence or even a trial collaboration.

You may decide that the time is not right for a merger and that a form of collaborative working would better meet your current aims. You should regularly review your options and could revisit the idea of a merger later.

Where there are no legal barriers to a merger, other issues can be a barrier. These include:

• the size and composition of the new trustee board
• the name of the new entity
• the new chair and CEO
• financial issues such as pension scheme deficits and future liabilities.

You should confirm early if these are absolute barriers or issues that could be resolved. The trustees should always act in their charity and beneficiary’s best interest in making these decisions. 

Consistent and clear communication to staff and stakeholders is key. A detailed plan for how information can best be shared throughout the process, at the earliest opportunities will be beneficial. It will allow you to minimize speculation, misunderstanding, and the fear of change.

The point where all staff are told of merger plans depends on the culture of the merging organisations. But legal obligations and the duty to consult staff mean that enough time should be allowed for consultation.

It may be sensible to keep the exploratory stages of merger confidential and only share information with the wider staff team once the board decide to move towards merger. The merger may not happen and the organisation risks losing staff.

Organisations may also risk reputational damage if it becomes known that they were involved in an unsuccessful merger.

Once the announcement is made, it is important to keep staff and volunteers informed and involved. Staff may be anxious about compulsory redundancies or relocation.

You need to give them a real understanding of the reasons for the merger and what it means for the future of their role and the organisation. 

A clear internal communication plan led by senior management is key to prevent low morale and a lack of information which can fuel unhelpful rumours.

Once the communications process is underway, it is important you are actively listening to people’s responses and engaging in real conversations .

Monitor how communications are being received and the questions raised, so you can adapt and add later phases of your communications plan accordingly. Do not ignore issues internally or externally. Tackle them head on to avoid escalation.