How to Talk with Your Nonprofit Board About Mergers and Affiliations

You know your options.

You have done the research.

You have made the decision. 

You are ready to lead your organization in exploring nonprofit mergers and affiliations as a means of expanding its reach and ensuring future viability. 

A growth venture of this magnitude can be overwhelming and complex and making the decision to explore M&A as a strategic initiative can feel challenging enough. However, once that decision is made, it’s time to approach your Board of Directors. As nonprofit merger and affiliation consultants, we are hearing more and more from CEO’s and Executive Directors that want to know where and how to begin. 

While we would recommend that every Senior Leader formulate and follow a logical and organized approach, the starting point may vary depending upon board involvement in the initial decision to explore M&A. Following a process will improve the overall approach and help maintain consistent and effective communication. 

We suggest these steps to get you started and to guide you throughout the process:

Evaluate the External Environment

As the leader of the organization, it begins with you becoming educated about what is happening in the market.

What are other organizations, competitors, and vendors doing?

What outside factors are driving or influencing trends? 

Seek out research or articles that highlight what’s happening within your industry or sector. Identify the political, economic, regulatory, social, and technological influences or disruptions shaping your industry. Speak with other leaders regarding what they are experiencing. 

This information will help inform your decision-making and provide the data points and insight needed for the steps that follow. 

Recognize your Internal Reality

Now that you understand the external environment, it’s time to assess the present-day reality of your organization and what impact the external market and trends are having on it. This includes an in-depth analysis of the strengths and weaknesses of your organization relative to the consumers you serve, staffing, operations, financials, and technological capabilities. 

What are your strengths and do you have areas to leverage for growth? 

The answer could be having strong industry/sector relationships with other leaders, or a new IT system that can be leveraged, or you have a larger cash position to leverage. Knowing what you have to offer will ensure you can provide an exchange of value in speaking with prospective partners.

What are your specific weaknesses?

Perhaps your organization lacks the resources to invest in relevant IT systems or your staff needs wage increases. Mergers and affiliations are as much about leveraging what you have as they are about filling your organizational needs. Understanding your weaknesses will help you identify those potential partners that have the ability to fill them. 

Establish the Urgency

Once you have a holistic understanding of the ecosystem and current state of your organization, it is time to turn your attention to determining urgency. 

Pose the question, What is at stake if we do nothing?

While some leaders and boards thrive on change or take it in stride, others resist it. Regardless of which group your organization aligns with, a catalyst for change is often required to get people to move from the current way of doing things to a desired future state. 

Discuss the risks, threats, or obstacles that your organization may face as the pace of change accelerates and nothing is done to align to the market movements. Understanding the potential pains and threats can act as a catalyst to do what is necessary to evolve as an organization. 

Develop a Vision

The next step is for you to develop a clear and concise vision of what you would like to accomplish and how it will address the market trends, current reality, and threats. Taking the time to organize your findings and thoughts will help you effectively communicate your vision to others. 

When developing your vision, be sure to remember that each board member brings their own background, foundation of knowledge, and perspective. For that reason, your vision should address the thoughts and concerns of those that think with the head, the heart, and the wallet.  

Those that will listen to you with the head will want to know the process and logistical flow of your vision. Those that listen with the heart will want to know how your vision will impact the mission and how those being served will benefit from your strategy. And for those that listen with the wallet, you need to address economies of scale, margins, and financial position. 

Once your vision is “board ready”, it is a great time to connect with your Board Chair to share your thoughts, get their perspective, and to collaborate on an approach to speak with the entire board about M&A.

Enroll the Chair

Enrolling your Board Chair is a critical next step when trying to align your organization toward M&A strategy design and execution. 

This discussion is about educating the Board Chair on your point-of-view, level of understanding, and vision for moving forward. Outline market trends, discuss internal realities, detail the level of urgency, and communicate your vision. Be open to questions and keep things conversational, however, be prepared to address how and why you believe this strategy will meet the needs of the organization. 

The goal is to come to a common understanding and to move to the next step as a unified team. 

Approach and Educate the Board

You are ready to approach the full board.  At this stage, the focus needs to be on education and building understanding of the situation so well-informed decisions can be made.

If your Board meets monthly or quarterly you may want to storyboard the work you and the Board Chair have done together and plan ahead for how to share your findings and vision. Moving too quickly can be overwhelming and paralyze decision-making or result in an immediate “no”. It may take 2-3 meetings to cover everything but that is time well spent when you are able to bring the board to a point of readiness to build a plan. 

Build a Plan

Once your Board is in agreement with the vision to develop an M&A strategy, it is time to build a plan. Before any other decision can be made, the board must determine which path forward makes the most sense for their particular organization. This can range from marketing the organization for acquisition, to affiliating with other organizations, to leveraging long-standing organizational relationships into mergers. 

Regardless of the path, every plan must cover several basic points in order to effectively approach the market with a message to other organizations. These points include the level of risk, knowledge of potential partners in the market, and prioritization based on need.

One of the single most important factors in determining M&A success is the partnership between the CEO and Board Chair (or Executive Committee). Building this partnership begins with thorough planning, acting intentionally, and communicating effectively. When applied, an organized approach will be an integral part of allowing your organization to achieve greater impact.