Recently, Britain’s
Lankelly Chase foundation announced its decision to “redistribute all its assets and close within a five year timeframe”. This caused a certain amount of excitement and made for a rare appearance of foundation-sector news in the
national press.
One thing we noted about Lankelly Chase’s announcement was that they were quite deliberate in not describing their decision as ‘spending down’ (see our
previous newsletter on foundations that do choose to spend down).
Instead it looks like they’re planning to do something more akin to breaking themselves into pieces, and then having those pieces merge with other organisations. They don’t use the word merge directly but CEO Julian Corner talked publicly about “assets being held by different people in different places so the work can continue”. Note the use of the word ‘held’ there, we imagine that ongoing endowments run by different organisations are part of the future plan. For example,
Baobab Foundation will receive £8m, so when Lankelly Chase expires, Baobab will live on.
To Merge or Not to Merge - that is the questionWe think that all funders should periodically discuss the question of whether they should continue to exist as free-standing entities, or merge with other grantmaking organisations, or with operational charities. This is as true for government funders as it is for private foundations.
The reason it is important to have this conversation is that all good funders exist to fulfil their mission. But your mission might well be better fulfilled by merging your funding organisation with another that’s aligned to similar ends.
Furthermore, mergers can create significant potential benefits for applicants. Two funders that may not be able to afford to run a high quality, accessible application process might find that, once merged, they can, which is great for grantseekers. And grantseekers looking for longer duration grants may find they are more readily available, after a merger of two smaller organisations.
If a funder doesn’t ever discuss whether or not it should merge with another funder, then it is actively choosing not to discuss what might be the biggest decision it could make to increase impact. Modern grantmakers discuss this sort of big question even when it’s uncomfortable for the individuals involved.
Which funders have merged?- The Masonic Charitable Foundation was created from the product of a four way merger more recently in 2016. Here’s the official story, another the coverage from Civil Society.
- Lankelly Chase is itself the product of a merger of two foundations, about twenty years ago. There’s some great, frank details about that in their history here.
- In the US, the super-huge Silicon Valley Community Foundation is the result of a merger, also in 2006. Janet Rae-Dupree was commissioned to write a report on the merger which she calls “an unusually open and candid account of our merger experience”.
Fun sidebar - the US-based Lodestar Foundation quietly bankrolls other nonprofits to merge. In fact they have an
entire funding programme dedicated to helping other nonprofits to merge. For example they helped fund
the merger between the Foundation Center and GuideStar into what is now
Candid. If you’ve ever visited that very useful website, then you’ve benefited from that merger.
When is it the right time to talk about merging?There are two moments where we believe that funding organisations should open up the question about whether they should continue to go it alone, or consider merging with another organisation.
First, they should do this at moments of major inflection - a new strategy, a new CEO or new Chair. These big moments are good times to pose big, tough strategic questions and this one should be on the list.
Second, we believe boards should schedule an examination of this question on a deliberate but regular basis, for example every 3-5 years. This question can sit in rotation alongside other major questions that should be re-examined from time-to-time, such as whether the board itself should change, whether the strategy is still valid, and whether the organisation should continue in perpetuity or not. Doing this on a formally-scheduled, slowly paced basis is part of what we at Modern Grantmaking now consider to be good board practice for funders.
How do you actually run a conversation on the possibility of merging?This conversation could easily be fraught and it’s possible that some people will be upset to even be asked to discuss it. It may, therefore, be worth considering the use of external facilitators to keep the conversation constructive. It also may well be worth producing a research report into what other organisations your own might actually merge with, first.
Any facilitator should consider covering the following questions:
- What people’s emotions are telling them about even initially discussing the idea of a merger (it’s important to get this out given the huge role this will play).
- What reasons exist both for considering a merger, or continuing independently.
- Whether there are any other funders who might make aligned partners, and if so who and why.
- What further questions would need researching before the board could make a definitive decision one way or another.
At the end, the board can then give the funder’s executive leadership a mandate to do further investigations, or to wind up the process (until next time, in a few years).
Have you ever been part of a funder merger? If so, we’d love to learn about your experience.
Contact us here if you’d like to talk.
