The number of mergers in the charity sector is at its highest for five years, driven by growth in the number of smaller voluntary organisations being taken over.
The analysis was published this week in the latest Good Merger Index (GMI) from Eastside Primetimers, using data from both before and after the Covid-19 crisis began.
Eastside Primetimers identified 77 mergers in the year to April 2020-21, involving 166 charities. This includes cases where two or more charities have merged into a single organisation as well as when one charity takes over or acquires another.
The largest merger, which saw Adferiad Recovery merge with three other Welsh charities, involved the transfer of over £20m in income, while another 12 mergers involved income transfers worth £1m or more.
Most mergers since 2017-18
The report said: “The number of mergers recorded (77) is the third highest since we started the GMI and the highest since 2017-18.
“We have found more organisations involved in mergers (166) than in the previous six years. Nevertheless, 166 organisations represent just 0.1% of the 169,862 charities in the UK at the end of the 2020-21 financial year.”
It also noted that, while the total income of charities involved in mergers had remained stable compared with previous years, the amounts transferred between merging charities had dropped by nearly two-thirds.
The report said: “The total income of the 166 organisations involved in mergers was £559m. This is broadly consistent with the previous two years – a product of a small reduction in the number of larger organisations and a large increase in the number of smaller organisations.
“However, the value of income transferred shows a very dramatic shift: £62m of income was transferred, down from £176m in 2019-20, and lower than any previous GMI year.”
Number of takeovers rises
The number of takeovers in the sector reached a record high of 58 last year, Eastside Primers noted, at the same as the number of “mergers of equals” between similarly-sized larger charities fell.
The year also saw an increase in the number of charities choosing to merge while in financial deficit which “may be an indicator of financial stress in the sector”, the report said.
Working together
Writing in the introduction to the report, Tracey O’Keefe, head of partnerships and mergers at Eastside Primetimers, stressed that it was difficult to know the causes behind these trends, but suggested that larger charities may “have been able to weather the storm” created by Covid-19 while “smaller organisations, with limited options for mitigating the effects of the pandemic, have resorted to being acquired by takeover to try to maintain their activities and beneficiary impact”.
O’Keefe added that, as well as formal mergers, the research found that “closer partnership working and collaboration may also provide valuable opportunities for charities and social enterprises to increase their impact, whilst driving efficiencies”.
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