Making Mergers & Affiliations Part of Your Strategic Plan
Strategic Need
Strategic need is what an organization needs as a result of the growth pressures it is experiencing. As a mission driven organization evolves it continuously becomes more complex. The complexities related to operations, staffing, competition, service, and revenue growth need continuous attention to support continued growth and viability. The fulfilling of strategic needs ensures the areas of the business are being fueled by investment, resources, and capacity.
Identifying Your Organization’s Needs
Determining a nonprofit organization’s strategic needs begins with asking the right questions:
What are the opportunities we need to pursue to be relevant in 5-10 years?
What are the threats to our viability?
As the Board of Directors and Executive Leadership team works to answer these questions, the gap between where things are today versus where they need to be in the future, often becomes clear. The size of this gap indicates the size of the lift to fulfill.
Exploring the size of the gap and timelines drives at the question: Should we build it ourselves or “buy it” in the form of a nonprofit merger or affiliation?
Filling the Gap with Nonprofit M&A
Strategic needs can be addressed through organic solutions such as incremental change, growth, and improvement, or through exponential thinking. While mergers and affiliations are the more exponential way to to fulfill a strategic need, they are far more complex and challenging compared to organic growth. However, when executed correctly, they are highly effective and impactful.
If an organization’s gap between where they are today and where they need to be in the future is large enough, it might only be closed through M&A strategy. For example if an organization wants to add a new service line but lacks the expertise or capabilities to do so, then M&A would allow that organization to bypass the time it takes to start up a service from scratch and build it to scale. M&A allows for more timely access to scale, infrastructure, and service growth.
Making Nonprofit M&A a Part of the Strategic Plan
Strategic planning begins with understanding the strengths, weaknesses, opportunities, and the internal and external threats that could impact an organization. This exercise, commonly referred to as a S.W.O.T will help inform the size and scope of the change an organization needs to make in order to remain relevant.
If the strategic need or level of change is large enough then pursuing M&A may provide the solution.
Making M&A a part of the strategic planning process should begin with an organization exploring more in depth questions:
Is the best solution for our organization to merge or affiliate with a larger entity that can support our strategic needs? Do we feel we have the leadership capabilities to lead a merger or affiliation?
If we are not large enough or ready to lead an M&A strategy, what would we be looking for from a partner and what do we not want to give up?
If we are able to lead an M&A strategy, what strategic needs must be fulfilled to move our plan forward and to better position our organization?
What is the profile of an organization that best fits the needs of our organization?\
These are the complex questions that will drive discussions between the board and leadership to clarify what is needed before engaging external organizations in an M&A strategy. The answer to these questions will also inform the strategic planning implementation timelines.
The most challenging part of implementing M&A as a strategic solution is that the relationship building process between organizations can often take time and success is not guaranteed. However, mergers and affiliations can be used to reach a level of scale that can’t be achieved organically, which may be a necessity to remain competitive, sustain payroll, address succession, or to improve an organization’s ability to meet the demands of those being served. Mergers are a vehicle that will allow leaders to fulfill their strategic needs at scale.