Recently, Tim Allen, Board Chair of CLASS, Inc. sat down to answer 5 questions about mergers:
CS: Many organizations are considering some form of consolidation or merger these days. As the Chairman of the Board of Directors at CLASS, Inc, how did your organization come to the realization that considering a merger was an important strategic move?
TA: There were a number of considerations, the first being the financial pressures that agencies like ours have been experiencing. Our operating costs increase with each fiscal year but our state and federal reimbursement rates have not kept pace with these increases. We needed to take a step back and consider all options that would allow us to preserve the mission of our agency. We needed to find a way to survive and thrive, and consolidation was our best option.
CS: The merger process requires a great deal of time, capacity, and energy from the Board of Directors. What should Boards considering mergers be prepared for?
TA: The Directors should be prepared to address new issues and a level of complexity that they may not have experienced ever before, both of which require the assistance of subject matter experts to help along the way.
We were fortunate in that we had people on our Board that had previous experience with for- profit mergers and acquisitions. While that has helped us a great deal, we still lacked the expertise in the non-profit space.
Finding someone to guide the Board in understanding the process, what it takes, what needs to be done, as well as the disruption that it causes, is critical in ensuring success.
CS: The merger process does not come without challenges. What are a few of the obstacles or challenges you have faced as Chair? As a Board? And how did you overcome them?
TA: Getting the right Team together, keeping that Team together and understanding what it’s going to take to keep the process moving forward.
As Chair, it was a challenge to keep the merger Team that we established as a subset of the Board in one piece. Every Board experiences turnover for a variety of reasons and we are not exempt from that. It’s a big commitment seeing this process through and holding that Team together. This was something we struggled with. My challenge was to keep that Team together because we needed the knowledge, experience, and comfort that we were accustomed to, during a time of great disruption and uncertainty.
Another challenge stems from the reality that there are many internal and external groups invested in the process that have a seat at the table. We worked hard and found success by keeping open communication with everyone throughout the process. We made sure that everyone was part of the process from its inception and that the level of engagement remained consistent.
It is important for Boards to remember that any challenges, such as those I mentioned, shouldn’t outweigh the benefits of a merger.
CS: Successful mergers are about culture and people, such as Board Members, Staff, and Clients. What insights do you have concerning working with and unifying two Boards?
TA: The best thing we did was to establish a working committee from each organization.
Early on, we arranged a meeting between the two committees. We got to know each other, established a working relationship, and developed a respect for each other. This became our foundation and the mutual respect we had for each other had a trickle-down effect. We took our excitement and comfort with each other back to our respective Boards and that had a very positive impact.
CS: What advice would you give other Board Chairs or Board Members that are considering a merger?
TA: First and foremost, if you don’t have anyone on your Board who has ever been through a merger or acquisition, get help fast. It is always going to be more work than you thought and there is always going to be something that comes up that you didn’t anticipate. Those are the biggest takeaways.
I would also advise the Board to take a close look at other agencies that they can work with and how that relationship will play out. Consider agencies they could partner with to more effectively meet the needs of those served. Seek-out an agency or agencies that have resources that can be shared that may be too expensive to acquire alone.