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Mergers are on the horizon

Mergers are on the horizon
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Mergers are on the horizon

Fundraising | 1 Nov 2006

Mergers are on the horizon as organisations struggle to compete and trusts and foundations change tactics

It's long been said that with 190,000 registered charities and many more applying to the Charity Commission every week there are too many organisations competing for a limited amount of money. And despite regular calls by the regulator for the sector to consider merging voluntarily, it now looks like market forces may push it upon them.

This is the view of some of the UK's top fundraisers, who reckon that charity mergers will become much more commonplace as small and medium-sized charities are edged out by the larger household names.

Mark Astarita, director of fundraising at the British Red Cross, Tony Elischer, managing director of Think Consulting Solutions, Alan Clayton, managing director of Cascaid and Andrew Muirhead, chief executive of the Lloyds TSB Foundation for Scotland, were speaking at the recent Institute of Fundraising (Scotland) conference in Glasgow.

"I'm not sure small and mediumsized organisations have a future," said Astarita. "I don't think I could do what I did at National Deaf Children's Society today. The pot of money that is available to fundraisers is not getting any bigger and we have to fight harder to get hold of it. I'm not sure what the solution is, especially as I am a director of fundraising for a major charity so am part of the problem."

Clayton agreed with Astarita. However, he said that mergers should not always be viewed as negative. "Organisations will get better at what they do and administration costs will be reduced. There are many charities out there that if they were driven by shareholders would have been merged years ago.

"I'm convinced the government has already decided there are too many charities but won't decide which should fold. Instead they are offering matched funding, leaving it up to the public to decide which should survive."

They are not alone in their perception of the future landscape. In August this year, a survey report by charity law firm Bircham Dyson Bell highlighted how 73 per cent of charity respondents expect a mix of giving fatigue and a shortfall in government funding to prompt many organisations to fold or merge. And the NCVO's 2006 Almanac, published in May, found that more than two-thirds of the sector's total income is generated by just two per cent of its organisations, leading to predictions of a 'shake-out' among smaller charities.

Influencing tomorrow's donors


To add to the woes of struggling organisations, the fundraisers highlighted how the pool of donors will also alter dramatically, becoming more difficult to target. "Like it or not, that war generation which gives the majority of our income and which is driven by predominantly religious beliefs, are going to die and when they do, who is going to replace them?" questioned Clayton. "What are we going to do to influence tomorrow's generation of donors who are governed by a completely different set of motivations?"

Changes to the way trusts and foundations operate were presented as another factor that looks set to have a big impact on the sector, with Andrew Muirhead raising the possibility of 'common funds' being established. These would be large pots of money that all funders would contribute to, he said, enabling them to collaborate in order to invest in longer-term sustainability. He also talked about how the venture philanthropy model, which sees not just money but contacts and expertise forming a funding package, is beginning to shape opportunities on offer - and fundraisers could expect to see more of this style of funding in the future.

"More and more grantmakers feel like investors with the heart taking second place to the head," said Muirhead. "Charities need to show they have the ability to make things happen."

This feeling was echoed in the conference opening plenary, when self-made millionaire and venture philanthropist Chris Gorman urged charities to change according to the funding landscape. Speaking in relation to gifts made by major donors such as himself, he said: "It's not just a case of getting the money and then we entrepreneurs leaving you alone. Let us use our experiences to help you strategically so you become more effective and thrive. Charities must truly embrace the opportunities this presents."

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