UK nonprofit makes mergers and acquisitions a strategy

Many view mergers and acquisitions as a last resort, but could combining operations be the future for small to medium-sized aid organizations competing for dwindling funds? Photo by: Ken Teegardin / CC BY-SA

Faced with fierce competition for funding, dwindling U.K. aid contracts and now the impending Brexit, one organization told Devex that mergers are the best way for smaller NGOs to evolve and stay relevant.

Concern Universal announced today it will merge with sports charity International Inspiration and rebrand itself as United Purpose. The new entity’s CEO Kathryn Llewellyn told Devex she believes such partnerships are the way forward for small to medium-sized development organizations now faced with funding uncertainty in the United Kingdom and Europe.

“The world is changing rapidly, donors’ priorities are shifting, the types of contracts we were getting are now going to management consultants and much larger private sector organizations,” she said. “Coupled with that, there has to be a bit of a realization as a whole sector we haven’t evolved fast enough.”

Llewellyn, who joined Concern three years ago as CEO, said she is hearing “a real appetite” to try something new in her conversations with other organizations as well as donors. “I think we do a lot of good as a sector, but there’s also a lot of bad and I don’t think we’ve been self-critical enough,” she said.

The realization drove Llewelyn to seek out like-minded organizations, and organizations “that had strengths and weaknesses that were opposite to ourselves,” she said.

The conversation with International Inspiration began a year ago and at first, it occurred to Llewelyn that a partnership might reward both groups. But something Sir Martin Davidson — then head of International Inspiration and now chair of the British Council, the international cultural and educational organization — said at the time really stuck with her.

“[Davidson] said to me, ‘organizations don’t have a right to exist,’ and for them, it was about, how does an organization best fulfil the objectives on which it was set up? Having a separate entity wasn’t going to make that any more possible, in fact it would cause the delay of bureaucracy and costs,” she said.

Mergers have now become part of UP’s strategy. Llewellyn said three more “conversations” with other organizations are ongoing with announcements to be made in the next year.

“There’s so many small to medium-sized organizations competing for the same impact, and we’ve become competition for each other, and yet we’ve all been encouraged to partner for so long, so this is the natural next step,” she said.

“Why on earth would we go out there and try and battle for other people’s networks and donors and shelf space? By coming together we can enhance what each has rather than battle for it,” she said.

International Inspiration, founded in 2012 as part of London’s Olympic legacy by Lord Sebastian Coe, has the “high-profile connections and supporter-base” to drive forward UP’s brand, Llewellyn said, not to mention strong local capacity in Ethiopia, Mozambique, Kenya, Ghana, Zambia, India, Bangladesh and the Caribbean.

Beyond retaining “the best bits” of both organizations, United Purpose employs more than 600 staff worldwide and is recruiting for both top and entry-level positions at its new headquarters in Cardiff, Wales. Llewellyn said about half of the two organization’s 75 staff in England will make the move to Wales, with the rest to be hired locally. This week it also welcomed Ben Jackson, former CEO of nonprofit convener Bond, as its new head of innovation and partnerships.

Llewellyn said Cardiff wasn’t an arbitrary choice for a base. The Welsh government is treating UP as an “inward investment project,” offering similar incentives to those used to attract businesses to Wales. The prospect of being the largest international development agency in Wales was also attractive, she said.

Donor uncertainty remains. Chief worries include the U.K.’s shifting aid strategy and the country’s impending exit from the European Union — both of which have implications for key UP funding streams from DfID and the European Commission.

Llewellyn said DfID’s payment by results agenda is particularly tough for small to medium organizations, who rely heavily on restricted income from government donors and “don’t have large cash reserves” to frontload interventions. She said these and other funding concerns are “actually one of the reasons we’ve become so innovative, and I think it’s made us think more about how we create more innovative flows of finance,” she said.

Last year, Concern reworked its fundraising strategy in hopes of securing a more diverse pool of donors. The results were positive, but the news that the U.K. will leave the EU raised new questions about long-term funding from the EC, one of Concern’s biggest donors.

“We’ve won new contracts last week actually, in Malawi and in Gambia, so to date it hasn’t impacted on our relationships” with the EC, she said. “We hold those relationships really close to the ground. … However we are very aware that it looks like ‘Brexit means Brexit,’ so actually part of our strategy is looking at other charities in the EU for other mergers.”

As Brexit makes itself evident, UP’s approach to improve the way aid organizations work together through mergers could offer an internationalist antidote to what many fear is an isolationist future.

For more U.K. news, views and analysis visit the Future of DfID series page, follow @devex on Twitter and tweet using the hashtag #FutureofDfID.

About the author

  • Molly Anders

    Molly Anders is a former U.K. correspondent for Devex. Based in London, she reports on development finance trends with a focus on British and European institutions. She is especially interested in evidence-based development and women’s economic empowerment, as well as innovative financing for the protection of migrants and refugees. Molly is a former Fulbright Scholar and studied Arabic in Syria, Jordan, Egypt and Morocco.