What should we consider in a merger feasibility study?

  • Cultural fit; perhaps the most significant barrier to successful merger is lack of “cultural fit”. Many charities rely on the goodwill of their stakeholders (beneficiaries, trustees, employees, volunteers, members, patrons, funders etc) and simply could not function without this. The merger partners need to assess if they will be able to work together successfully and without alienating key stakeholders
  • Legal issues; it is usual to start considering the appropriate legal structure at an early stage, and it is usually advisable to consult with a charity lawyer or with the Charity Commission early on in the process
  • Benefits and risks; an outline assessment needs to be made of what the merged entity will look like, what its activities and costs will be and how they will be funded. Any significant risks or uncertainties should be identified and assessed. SWOT analyses (to look at strengths, weaknesses, opportunities and threats) and risk assessments can be useful tools for identifying potential issues
  • Costs of merger; a realistic assessment of the merger costs should be made and funding identified. Merger costs typically include professional fees, the costs of obtaining member consent, the costs of reorganising service provision, redundancy payments, relocation costs, rebranding, the costs of merging IT systems and the opportunity costs of disruption, lost opportunities and of trustee, staff and volunteer time spent dealing with the merger

Want to discuss further?

Jonathan Orchard

Partner

Ross Palmer

Senior Tax Manager

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