The Heat is On!

The pace of mergers and collaborations in the market is heating up. Costs, regulations, technology, and the need for talent are now leading many to the conclusion that merger strategy is an option to be considered when planning for future sustainability. So much so, in fact, that the majority of leaders we speak with are now including the topic as part of their Board of Directors meeting agendas. 

As anyone with merger experience knows, they are complex and involve many moving parts. From the initial strategy conversations concerning the reasons to merge, all the way through to how to successfully integrate two organizational cultures, people, and systems; we have found that preparation is key and experience is essential. 

Long before any strategic discussions take place, Leaders must determine their organization’s merger readiness. Knowing the As-Is state of an organization will dictate both when merger discussions should take place and with whom.  Leaders must know and be able to answer the following 7 questions as the first step in the merger process:

  1. Why would we consider merging at this point in time? 

  2. What is the business case and strategic value for a merger?

  3. What are our strengths and weaknesses as an organization?

  4. What are we looking for from a partner?

  5. Would we considered being acquired? Merging with an organization of similar size? Or acquiring a smaller organization?

  6. Is there value to merging with a partner outside our sector or with an organization that provides the same services?

  7. What opportunities exist in the market now and do they align with our strategic need?

While these are some of the most difficult questions to answer, they are also the most important.   Having a clear and concise view of an organization’s merger readiness will reduce frustrations and increase efficiency when initial discussions begin. 

Mergers in the nonprofit sectors often have different considerations compared to the for-profit world. In addition, we have found that organizations can face dramatic differences in the level at which Leaders, Boards, and Stakeholders are engaged and participate in the process.

We recommend that Board of Directors be intentional and clear with merger strategy to ensure all Board members and key Leaders are operating with a common understanding. It is critical that all parties involved have clarity on the answers to the questions below when moving forward and setting terms for a potential merger agreement:

  1. What are we willing to consider regarding leadership changes?

  2. What are we willing to consider with regard to our brand?

  3. What are we willing to consider for Board seats?

A successful merger or collaboration between organizations of any size can: eliminate competition, expand service offerings, acquire talented staff, reduce expenses, improve quality of service, expand geographic reach, diversify revenue, improved service delivery, and allow for greater investment in technology.

Most importantly, a merger or collaboration can ensure survival in a highly competitive marketplace and allow organizations to remain relevant and viable in the years ahead.