If comprehensive funding cuts have taken away all your funding for activities, then it is unlikely that you will find a willing merger partner.
However, it may be that partial funding cuts have merely left you struggling to sustain your organisational infrastructure (management, administration, governance, premises etc). In such a situation, merger with one or more other agencies may be a significant option.
Structurally a merger may mean:
- Merging one or more agencies into an existing legal entity, usually the largest or longest-established one (subjectively known as a ‘take-over’). Sometimes the legal entity which remains is the smaller partner (‘reverse take-over’), e.g. because a charity cannot transfer its assets into a non-charity
- Merging into a new legal entity created for the purpose
However, final structure should not be your key consideration. Initially, the key question to ask is: What is the business case for merger? What are the benefits for our organisation and our beneficiaries? What are the costs and risks? Would we be keeping each other up or dragging each other down?
Before investing money in a financial due diligence exercise by accountants, you need to explore with your potential partner(s) whether there is a shared vision for what you want to create and achieve. There is also a check-list of commonly encountered deal-breakers you should go through:
- Is there a clear business case for merging?
- Are the Objects compatible in the governing documents of the organizations?
- Is there potential agreement on the size and composition of the new Committee member Committee?
- Is there potential agreement on the new legal structure?
- Are there any issues around ‘restricted’ reserves?
- Is there potential agreement on the name of the new entity?
- Is there potential agreement on the Chair of the merged organisation or the process for arriving at a decision?
- Is there potential agreement on the Chief Executive of the merged organisation or the process for arriving at a decision?
- Is there potential agreement on the future of existing premises?
- Are there any issues around compatibility of organisational cultures?
- Are there any issues around Pension scheme deficits?
- Are there any issues around compatibility of IT systems?
For more detailed guidance see: