By Bonnie Chiu & Natsayi Sithole

This is the second blog in our integration series. If you missed the first one, you can read it here.

Deciding to acquire (Bonnie)

The scaling up journey in entrepreneurship is stacked against women. According to Rose Review, male SMEs are five times more likely to scale up to £1million turnover than female SMEs. In UK social investment, data collected by three prominent social investors in 2021 across a selected sample of funding programmes – although incomplete and last updated in November 2022 – shows lower approval and application rates for Black and Minoritised women-led organisations. Part of this comes down to perception bias. I know that our decision to acquire TSIP and Renaisi has been called “empire building”, “personal enrichment” and other unpleasant things. Would these have been said of a male, white entrepreneur at the helm? 

Equally, for Renaisi, the decision to sell was not a common route for the UK social impact sector – Natsayi reflects on this later in this blog.

Part of the motivation of bringing TSIP and Renaisi under our umbrella is indeed about supporting diverse leadership. Both TSIP and Renaisi were women-led – both CEOs and entirely women at senior leadership level in both organisations. They both also had a diverse staff base. I personally felt responsible, given how rare it is for especially women of colour to be leading organisations many of whom are taking the wheel at a time of unprecedented challenge for the sector and the economy.

Truth to be told, when we decided to step into supporting these two organisations, it was happening so quickly, that we didn’t have the full strategic rationale outlined. A plague facing the social impact space is that everything is run on a shoestring, that to be ‘strategic’ is often a luxury that many don’t have. We also had our day-to-day running of the business to focus on – a pace that waits for no one. Just to bring it to light, the discussions with TSIP were happening during our family holiday and Chinese New Year, and for the first call I had with Renaisi and the brokers, I had to join it with my 3-year-old daughter, as we could only manage to speak at 6pm, after office hours. We will reflect further on our thoughts on, “who gets to be strategic” in our sector, in a later blog in this series. But of course, there were reasons why we stepped in from both business and impact perspectives.

Deciding to sell (Natsayi)

From a business standpoint, many organisations the size of TSIC, Renaisi and TSIP often face scale up challenges. They’re too small to justify additional overheads, but too large to avoid them. By integrating similar-sized organisations, we could create shared organisational services (back-office operations, technology, etc.) to improve efficiency. This could help us overcome the capital challenges of scaling up that women-led organisations often encountermore than male-led organisations, as evidenced from the Rose Review.

While the sector prides itself on innovation, mission orientation and goodness knows we love a strategy, it’s still very rare – and a bit taboo – to talk about M&A in a way that it just isn’t in any other industry. Selling Renaisi’s assets was the last option on the list. Our refreshed diverse Board made it possible for us to take this option seriously and run with it with a core set of values front a centre to guide our selling strategy, including maintaining legacy and multiplying our future impact.

I believe it’s essential to get comfortable with these decisions and to extend opportunity for taking them to a more diverse range of organisations. Unlike purely commercial industries, “letting the market decide” does not always make sense for the social impact sector. It’s not an issue of value for many of the organisations we have seen close or fragment over the last five years. Infrastructure organisations, specialist charities and social enterprises providing obvious value have been challenged by intense economic headwinds and the complex economics of doing business in the social impact space in the UK. Doing good work, often makes doing good business very difficult indeed. 

For the social sector, there’s a clear benefit to M&A as one way to shore up the ecosystem, maintain plurality the sector needs (in leadership, approach, scale, vision and the small p politics of change etc.) in order for it to be useful (do we want an industry dominated by a few huge players?), and challenge the growing fragmentation at a regional level that will play a hand in deepening disadvantage if left unaddressed. 

Reframing these transactions as mission-oriented partnerships could help us to think about this differently. It helped me and Board think about it differently. In turn, this approach will also enable funders and investors rethink risk and open their minds to working with a greater diversity of organisations to consider M&A on the front foot (not in crisis) and approach possible partners as a way to further impact. We will share more on what we think funders and investors can do in this space in our next blog.

Reaping the benefits of integration

From an impact perspective, all three organisations are united by missions that focus on catalysing systems change through equity-centred methods. But the business model of social impact consultancy means that we are often competing, rather focussing on what we do best to create impact together. While we all say that we can’t create change on our own, up to this point, there were no incentives for us to truly collaborate. Through coming together, we have a larger platform for change, and broader experiences to tap into to create systemic impact. We are now able to build on the synergies in our offers and expertise through shared workforce development and collaborative product development initiatives to advance our offer to the sector both as separate organisations and, in future, combined.

Six months on from deciding to integrate TSIP and Renaisi, we are continuing work on realising the synergies from integration, and we know we need to see this as a long-term investment. Some early wins and lessons learned include: 

1. Focus on what generates value: To create operational synergies when integrating SMEs, you cannot do everything at once. We prioritised developing a shared project management system, streamlining our operational workflows, and establishing a joint leadership group to lead on business development and other areas. Having champions across levels of all the organisations is key to build momentum for the cohesion, changes in ways of working, and open collaboration these changes aimed to start to catalyse.

2. Get to know one another: To realise our impact synergies, we needed to deeply immerse ourselves in each other’s work. Power dynamics are essential to pay attention to here. There was a sense of staff feeling like they were pitching themselves or justifying their work and value. To mitigate, we encouraged critique and appreciative inquiry to be afforded to all three organisations equally. We created space and time to do this often and in-person, with each organisation leading those spaces in turn. A few times, we have been invited to present to delegations visiting the UK. Doing the presentations together has helped us gain new perspectives on each other’s work. Fundamentally, we respect and acknowledge the different origins, histories, and successes of the three organisations and brands, while reminding ourselves that we are all working towards the same vision of systems change. This has been powerful in shaping our new direction – rooting it in value and mission. We are looking forward to sharing our strategy soon – stay tuned!

3. Acknowledge the power differential: An acquisition necessitates a power imbalance as part of the transaction. But it doesn’t have to dictate the way the deal shakes out on the other side for the people involved. As social enterprises (or hybrid organisations), we need to not lose sight of both business and impact drivers of the integration. Our staff are naturally impact-driven, but a learning curve has been to bring and upskill them into the business part of the change as well. This means there is a careful balance to strike.  There is a fine line between co-producing change and pushing down responsibility that ultimately sits with the Board and Executive. Even more problematic is setting unrealistic expectations that there is more space to influence some decisions than there really is. The lines of accountability need to be clearly drawn. Where decisions are collaborative, we show how everyone’s contributions have led us to those answers and ideas. Where they simply cannot be, we try and be clear about that.  This point speaks to more of our learnings on bringing people along the journey of change – which will be the focus of the next blog.

Ultimately, there are so many to dos with an integration, it is easy to drown in the what and how and forget the why. The more people share the why of their integration journeys, the more M&A can become an accelerator for systemic impact. Check out the recent blog on SSIR, about M&A as a source of strategic growth as well. We hope to keep sharing our lessons learned. Do let us know if there are areas you are curious about!