More and deeper collaboration is, as Dawn wrote on Monday, likely to be a key element in many organisational responses to the disruption we are all experiencing. Mergers, the creation of new legal entity from the combination of two or more previously separate legal entities, is at the ‘full-on’ end of the collaboration spectrum.
Mergers are rare in the arts and culture sector for several reasons including the importance of distinct artistic identities and a lack of resources to invest in merger costs but they do happen, for example
- Sound and Music (2008)
- HOME (2012)
- One Dance UK (2015)
The relative rarity of mergers mean that many working in the arts and culture have never experienced a merger; often the only people who may have are trustees who have been involved in private or public sector mergers. This lack of familiarity and knowledge can complicate early discussions and contribute to people’s fears and anxieties.
There is considerable advice and guidance available online for charities and social enterprises who are considering, or being asked to consider, merger as a strategic option and we have signposted a range of them below. Rather than just summarise the excellent guidance available we thought that we would offer some reflections on the top five questions that we are asked when people starting talking about mergers.
Are real mergers of equals possible or is it always a takeover?
Mergers bring two or more organisations together: their people, buildings, relationships, financial and intellectual assets are brought together to create something new. Elements of both predecessor organisations’ assets, identity and ways of doing things will need to be given up to make space for the new organisation to grow and flourish. If you want a 50/50 split you will be disappointed and end up with an organisation that is, at best, just the sum of its parts and no more but equally a complete takeover usually destroys rather than creates value.
How might we work on a merger?
A merger is not business as usual and you will need to establish a process and earmark resources to explore the option fully and to go ahead, if that is your choice.
Establish a small group of trustees and staff within each organisation that is tasked with progressing the project, Ensure that there is a clear brief and that they have a budget for external advice and back filling of posts if necessary.
Create a combined working group where members of each project group work together with people from the other organisation. Once this group is working well and you have clarity on key issues, consider creating other project groups for specific issues/areas involving a wider group of staff.
How long does it take?
Answer: it all depends! It is possible to merge two organisations in three to six months if there are sufficient resources to bring in substantial external support (lawyers, accountants, consultants, interim staff etc) but all that can be achieved in this timetable is a legal merger; all of the work of making one organisation from two will need to be done afterwards and is likely to take one to two years.
A less radical approach would be to allow for 12 – 18 months pre-merger work to start to bring the two organisations together and to work through issues such as terms and conditions and to then allow 12 months post-merger work to complete the process.
If you are looking to merge more than two organisations, it will take longer.
What should our first steps be?
Start with yourself. Develop an honest and shared view of your organisation, your context, your strengths and weaknesses, your ambitions, your motives for considering merger and your ‘red lines’. Revise as you progress.
Research the process and potential partners: use the resources listed below to build up your knowledge of how mergers work and take a long, creative look at who you might partner up with.
Establish a combined trustee/staff team with a clear brief and accountability to develop a plan to select and engage with possible merger partners, liaise with stakeholders and get your own house in order. Talk to others who have been through a merger process.
What works?
Famously most mergers in the private sector fail to create the anticipated value and the most quoted reasons are that the acquirer paid too much, in other words doing the deal became all important, and that the cultures of the organisations were incompatible.
Based on our work on merger projects in this sector, some of which resulted in mergers and others which did not, we would offer the following.
- Honesty about motives, strengths and weaknesses
- Realism about the process and its possible gains, especially in the short/medium term – it will take longer and cost more than you planned for
- Co-creation of a compelling vision of the future and a case for why merger is the best route forward
- Transparent, consistent and future centred communication that builds real engagement with staff and stakeholders
- Co-designing a fair and deliverable process – no promises that it will ‘all be over by Christmas’
- Willingness to take appropriate and timely professional advice
If you do decide to explore this option in the coming months we wish you well.
Susan and Dawn
Resources
If you are a charity this guidance from the Charity Commission is essential reading.
Excellent overview from NCVO
The Institute of Voluntary Action Research has undertaken research in the field of mergers for several years and has developed some excellent resources including an update for Covid-19.
- Voluntary and community organisations – merger
- Thinking about mergers
- Thinking about merger during Covid-19
NPC has also developed a range of resources for charities considering mergers including guidance and case studies.
Eastside and Prospectus produced a useful if slightly dated report in 2012
Sayer Vincent, a firm of charity accountants, have produced a good straightforward guide.