Charity mergers up 90% as organisations look for economies of scale
Consolidation in the charity sector has seen an annual jump of 90% – reaching a record high, according to analysis of Charity Commission data by RSM UK.
The number of charities recording mergers increased from 174 in 2023 to 331 in 2024, as growing cost pressures led charities to consolidate to deliver economies of scale. With over 180,000 charities in England and Wales, mergers can offer several benefits to the sector including reducing the duplication of efforts and resource where multiple charities might have the same objectives.
Nick Sladden, partner and head of charities at RSM UK, said: “Carrying out a merger or even being aware of merger opportunities should be on every charity trustee’s radar. The economic turbulence faced by charities last year, which is set to intensify in 2025, has encouraged them to become more outward looking about their future. The stark reality of increasing costs has meant charities are looking for economies of scale and merging with larger organisations with greater access to resources. The increase in mergers is also likely to be due to better administration and the general tidying up of charity funds.”
However, this upward trend in mergers may not be that clear cut, with some likely to be signs of other activity, such as separate trusts being merged into larger foundations, possibly because investment returns are better from one larger pot than several smaller ones. In addition, it may be evidence of charities going through a conversion process – moving to a new charitable form such as a charitable incorporated organisation (CIO), which has fewer reporting requirements. CIOs have been a less well-known structure in the UK compared to more established structures such as charitable trusts and charitable companies limited by guarantee, but in recent years have become the most popular structure for new charity registrations.
A merger of charities means two or more legally separate charities coming together to form one charity. Mergers are registered and this helps charities secure future gifts, such as legacies. By registering, gifts to the original charity (that has closed after merging) will pass to the merged charity.
Robert Nieri, legal director at Shoosmiths, added: “The cost pressures over the years, particularly more recently, have prompted a lot of organisations to do something they’ve probably needed to do for years; tidy up their governance into new, leaner models. However, when undertaking a merger, it’s not just the technical aspects that need to be considered, as combining two or more different cultures can be challenging, time consuming and a distraction from the day job. Whilst merging can create many efficiencies and opportunities for growth, the decision to undertake one shouldn’t be taken lightly.”