All content on this page is correct as of February 9, 2021
Lawrence Simanowitz, partner at Bates Wells, recently shared his observations on the surprising lack of increase in the number of mergers across the sector.
Lawrence, who regularly advises on mergers, said to Third Sector: “If you look at the economic research we have seen showing a really high proportion of charities that thought they would not be able to see the year out in terms of funding – faced with a choice between going to the wall and losing everything, or trying to find some kind of host for the work that you are doing, mergers are an obvious way of salvaging what you’ve got.”
While it’s possible that government measures such as the Coronavirus Job Retention (furlough) Scheme have postponed the impact of some negative effects from the crisis, it could be that the motives for mergers are not ideal while the sector is experiencing such extreme financial problems.
“A ‘life or death’ situation is probably the wrong reason to merge,” he says. “If you’re merging in the face of a crisis, then you’re likely to make bad decisions, not least because you’re doing things in a hurry. Of course, if it is about having a route to survival and is better than nothing, I wouldn’t tell charities not to do it.”
While mergers may make sense for national charities looking to extend their influence and reach, there are often valid reasons for why charities are reluctant to merge. Lawrence explains: “People have these fears, and they can be well-founded, that one organisation will swallow another and the first organisation just loses its identity – not just its branding, but its culture, its staff who face redundancies. There are concerns about what might be retained and what might be lost.”
Lawrence agrees that in an ideal world, charities should merge because the combination of the two organisations could lead to the creation of something better for the people they support.
Irrespective of the economic situation at hand, Lawrence assures that any decision made should be based on recognising the most effective way to achieve a charity’s objectives.
To speak to Lawrence about mergers, you are welcome to contact him here.
This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.
All content on this page is correct as of February 9, 2021.