Mega-merger of Canada’s biggest cancer charities: Canadian Breast Cancer Foundation joins Canadian Cancer Society

October 28, 2016 Canadian Cancer Society and Canadian Breast Cancer Foundation announced intentions to merge. Charity Intelligence does not anticipate this merger will raise social impact.  The most obvious gains for donors may come from better cost efficiencies. Charity Intelligence recommends Canadian donors wait and see how this merger unfolds and for cost reductions to materialize.

This is a big Canadian charity merger. Canadian Cancer Society is the 4th largest Canadian charity measured by donations and public support from special fundraising events. In F2015, Canadian Cancer Society received $150.1 million. Canadian Breast Cancer Foundation was among Canada’s largest-40 charities with annual donations and funding from special events at $38.7 million. Combined, Canadian Cancer Society will reclaim its #2 rank with pro-forma donations and funding of $188.9m behind only World Vision Canada.

With so many Canadian charities fundraising in the cancer sector, consolidation is generally a good move. The more obvious need for consolidation is among the smaller charities where there is duplication. There is less operational overlap between Canadian Cancer Society and Canadian Breast Cancer Foundation. Canadian Cancer Society is a multi-service “one stop shop” running programs for Canadians with cancer, advocating for legislative changes (tobacco labeling, tanning beds) and funding research in all cancer areas. Canadian Breast Cancer Foundation’s strengths are in corporate fundraising with a narrower focus on granting to breast cancer research.

Despite Canadian Cancer Society being 4-times larger, Canadian Breast Cancer Foundation takes the top job in the merger. Lynne Hudson formerly President and CEO of Canadian Breast Cancer Foundation is now President and CEO of the merged Canadian Cancer Society, effective immediately. Before joining Canadian Breast Cancer Foundation in September 2015, Hudson spent 8 years with Plan Canada, and has an MBA and an engineering degree.

The timing of this merger and new leadership may cause delays. Canadian Cancer Society has just consolidated its provincial chapters under one national organization. Typically, after such consolidations, managements focus on optimizing operations rather than launching into another strategic initiative. The economies of scale from consolidation have yet to emerge.  

Merging strong consumer brands is tricky. Canadian Cancer Society and Canadian Breast Cancer Foundation have the two biggest brands in the cancer sector – and these brands are distinctive. The pink ribbon logo and the yellow daffodil are well known by Canadians. Canadians also support CIBC’s Run for the Cure (organized by Canadian Breast Cancer Foundation) and Relay of Life (organized by Canadian Cancer Society).

Given the strength of these charity brands, Charity Intelligence does not anticipate any cost synergies in fundraising. Charity Intelligence expects future fundraising costs to remain around $67 million annually. On current donations, this is 36% of total donations and special events.

The amalgamated charity has significant opportunities to reduce administrative costs. On a pro-forma basis administrative costs will be an estimated $26 million. Without cost reductions, on a pro forma basis, the merged charity spends 48% on fundraising and administrative costs which is a level well above Charity Intelligence’s reasonable range and nearly double the Canadian large charity average of 26%.

The merger is expected to be approved in February 2017.

 


 

PRO FORMA

CCS -CBCF Charity

Canadian Cancer Society (CSC)

Canadian Breast

Cancer Foundation (CBCF)

Fiscal year end 2015

 

 

 

Overhead ratios

 

 

 

Administrative costs as % of revenues

12%

13%

8%

Fundraising costs as % of donations and fundraising events

36%

37%

30%

 

 

 

 

All figures in $000’s

 

 

 

Donations

92,981

83,340

9,641

Special events

95,895

66,803

29,092

Total funding from donors

188,876

150,143

38,733

Government funding

11,293

10,681

612

Lotteries (net)

7,289

7,289

-

Investment income

7,996

6,679

1,317

Other income

5,875

5,540

335

Total revenues

221,329

180,332

40,997

 

 

 

 

Cancer program costs

81,064

69,346

11,718

Cancer research grants

60,207

42,751

17,456

Administrative costs

26,075

22,892

3,183

Fundraising costs

67,140

55,695

11,445

Cash flow from operations

-13,157

-10,352

-2,805

 

 

 

 

Funding reserves

190,257

136,908

53,349

 

 

 

 

There figures are based on F2015 financials. Canadian Cancer Society’s audited financial statements for the year ending January 2016 are yet to be posted. Charity Intelligence will update these figures when they are made available by Canadian Cancer Society.

 

Kate Bahen

This email address is being protected from spambots. You need JavaScript enabled to view it.

416.363.1555

 

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