A blog about mergers – by Paul Jansen
The initial shock of the Covid crisis and the subsequent lockdown has eased off. You have found ways to keep going for the moment and your staff have got to grips with Zoom. Your organisation will have fallen into one of two camps: increased pressures on delivery if you are in the ‘keywork’ arena, or serious money worries if you are not. OR if you are really unlucky, you saw the need for your work supporting vulnerable people increase AND your donations dry up. Despite some (half-hearted?) attempts Government never managed to get a charity-only version of the furlough scheme going that would have solved this. So it’s been tough.
And now that society begins to unlock and government support will soon start to tail off, your scenarios are becoming clearer, though not necessarily rosier. If you haven’t already done so, now is the time to think the unthinkable and consider all options for your organisation, including merging with a sector partner.
In my fifteen years of working in the sector I have been asked countless times why there are so many social enterprises and charities. By now there must at least 170,000 registered charities and more than 100,000 social enterprises in the UK. Surely many could and should merge? Wouldn’t that be much more efficient? In my various roles as interim CEO and trustee in the not-for-profit sector, it was a topic that often returned on the agenda but equally quickly abandoned. Why was it such a no-go area?
Perhaps it has got something to do with parental pride or umbilical cords. I remember the time when my daughter was just a toddler. As I considered the part of Cambridge where I live, I realised there were plenty of good, wholesome families who matched my values and who had some food to spare and probably a space for an extra bed. Nevertheless, it didn’t cross my mind to propose that they would perhaps take in my child as well. Surely that would be much more efficient…?
Of course, when passion and values are involved, it is pretty hard to give up your baby for the sake of some rational argument. You have invested your dreams into this and sleepless nights. Not to mention blood, sweat and tears.
However, we now have a crisis on our hands and this calls for some radical thinking. So although the numbers of not-for-profits may not be a particularly strong argument for considering whether it is time for your charity or social enterprise to start talks with your equivalent down the road (you could make the same case for many commercial sectors), neither is it of course a subject that should be avoided at any cost. As a mission-driven organisation, you should always be on the outlook for a better or more sustainable way to fulfil your purpose, and to consider joining a similar outfit should be part of that.
I believe there are – at least – three important considerations why you should put your parental feelings to one side and seriously look into this without delay.
To start with, there is not much time to waste. In this Covid crisis that is more relevant than ever, and for some of you the ideal time to start this process has perhaps already passed. But all is not lost.
Timing is important for two reasons:
You want to explore options from a position of strength, when your organisation is as healthy as it can be, even if there are dark clouds on the horizon. That means having a stable team, a good board, decent financials. And some successes under your belt, perhaps some contracts still running for a while and assets to build on if not to negotiate with.
Also, a merger process takes a long time. This does of course depend on your starting point, the speed with which solutions need to be found, the decisiveness of you and your board, etc. But some timelines are out of your control, such as the lease on your office, or the speed with which your ideal partner can act. And other timelines are unwise to rush, for instance the building of trust with the other party and the creation of that all-important collective vision.
Both arguments lead to the conclusion that you cannot start early enough. Have your shortlist of favourite potential partners in your head, have exploratory conversations with key stakeholders (including main funders) as a matter of course, do your research. And do all this while your platform isn’t quite burning yet.
Secondly, if time required is not to be underestimated, then also consider the resources you will need for this process once conversations with a potential partner start in earnest. As a trustee of a mid-sized charity I was involved in the merger with a similar sized organisation. If I am honest, for years we both had been doing great work but there was also an element of People’s Front of Judea versus the Judean People’s Front about it. Nevertheless, when the right conditions arose we managed to start talking in earnest, build the required mutual trust and agreed on our shared purpose. But it took us more than a year and a substantial (think six figures) sum of money to get to the finishing line.
Those financial implications contained a whole host of items: lease break penalties, the search for and refit of the new office (although with your improved videoconferencing skills who knows whether you will want one), a new name and logo design, legal advice, redundancies, IT refit, website, the list goes on.
Equally importantly, we learned that the resource drain on the organisation was substantial too: management and board members’ time to discuss all ins and outs and gauge views of key stakeholders and funders, craft financial projections, align our vision and create a joint direction for the new organisation. We created trustee sub-committees who negotiated the deal from either side, and managerial working groups that focused on the details. All this was highly essential for a successful outcome, but it did take time and energy away from the day job. Time and energy which you probably also need to fight the crisis in hand.
And finally, and this comes back to my point about the 2-year old daughter, think about the emotional rollercoaster you are embarking on and how you might guide your organisation through this time. When you have been operating as (quasi) competitors for years, don’t underestimate the time it takes to build a new relationship with your coveted bed fellow. It will be crucial to keep your eye on the (purpose) prize and not get side-lined by emotions, frustrations, them-and-us-ness. You should also consider how to deal with the feelings of bereavement involved with loosening that umbilical cord and bringing your adventure as an independent organisation to an end.
Does that come down to just you as ‘the leader’? Perhaps that is where it starts, yes. But don’t think this is a leader’s job only. Why don’t you bring frontline staff into the process early on, and let them co-shape what a new organisation could look like? It would set the tone for the future and address a lot of the helplessness many parts of the organisation usually feel in processes like these.
Don’t forget that symbols play an important part in times of change, so if you can set the tone early on by making some clear decisions, show your own vulnerabilities and walk the talk, it will stand you in good stead when tough asks are made of the rest of the organisation in the months to come.
A good merger not only results in a viable new organisation and minimum casualties. It results in new-found ways of supporting your target audience and being able to do some of the things you were unable to on your own. Whether that is real service innovation or having more clout with your commissioners and funders.
Of course, merger is not the only possible answer. You may go one step more radical and consider being taken over. Or you can use this as an opportunity to acquire another organisation yourself! Or perhaps this is the push to radically transform yourself and consider focusing your resources on that fraction of your current services that deliver by far the biggest value to your customers, but doing it really, really well…
I wish you and your team much strength, courage and wisdom in these challenging times, while you work out how to find the best possible future for you and your baby.
About the author
Paul Jansen was COO at social enterprise Buurtzorg Britain & Ireland between 2018 and 2020 and is an authority on the concept of self-managing organisations. Since 2005 he has led and created several social enterprises and public service mutuals. He supports organisations in their drive to evolve, grow and/or transform. You can read his blogs here: www.runandjumpltd.co.uk/blog