Mergers

Are Mergers on Your Mind?

Conversations concerning mergers are now occurring across the country more frequently than ever before. We are seeing collaborations and merger discussions across every sector, including healthcare, human services, and even higher education. We believe there is real value in considering mergers as a strategy, but many organizations may not be prepared for the journey. This leaves many to wonder: What needs to be done while considering a merger?

There is no quick answer to this question due to the numerous factors and variables involved. However, we’d like to offer you the following tips from our own merger facilitation experience to help get you started:

  • Engage your Board. The Board of Directors is the single most important stakeholder when considering this type of strategy, so setting a plan for Board engagement and communication is critical. Even more important is making sure that the Board is part of this process from its inception and that the engagement remains consistent. 

  • Your why. What needs are you trying to fulfill in your organization? What value and benefit would a collaboration add? Understanding what your organization needs and how it can be improved, provides the foundation to support assessment and decision making.

  • Build it or Buy it. For those organizations that have reached a size where organic growth is no longer a viable approach, considering mergers as a means of addressing growth strategy, cost savings, quality, or competitiveness is a viable solution.

  • Understand risks and capacity demands. It takes a significant amount of time to build strategy, find candidates, manage the deal, and then integrate once the merger deal is finalized. This could translate to an organization being unable to undertake any other initiatives during this time. Factoring this in to planning avoids the pitfalls of being overburdened or strained.

  • Answer difficult questions first! Once the process is underway, there are several critical questions concerning the surviving entity that need to be answered in order to avoid wasting time: Who will serve as the Executive Team and Board Officers? What will the surviving brand be? Who will serve on the Board of Directors? Answering these questions early on will make decision making much easier as the process moves ahead.

  • Make the tough decisions. Once the merger contract is signed, the implementation process begins. It is during this phase that decisions need to be made around restructuring. These decisions are often very difficult and stressful but, with the right approach, frustrations can be minimized. For our insights on restructuring during an Organization Design project, click here.

  • Mergers are about people. An organization’s culture is formed over time through shared values and mergers begin with the people who make up that culture. In part, a merger is the unification of two cultures, so you’ll need to allow ample time for due diligence. During this phase difficult questions will arise as an in-depth review of financials, governance, human resources, organization charts, and planning documents will occur. This is also a time to become more familiar with people and their abilities through engagement, communication, and feedback.

Considering a merger is a significant decision for any organization but preparedness is key. A successful merger will help an organization eliminate competition, acquire talent, save money, expand geographic impact, and improve quality of service, among other countless benefits. Most importantly, a merger can ensure survival in a highly competitive marketplace and allow organizations to continue the positive impact they have on society.

If you have an interest in learning about merger strategy and discussing whether it is a viable approach for you, please connect with us here.

Top 3 Strategies to Achieve Growth

In today’s world, organizations are finding it increasingly difficult to keep up with the pace of change that is occurring in the marketplace. Growth, sustainability, relevance, and future viability discussions have become commonplace in the Board room and amongst Leadership Teams as organizations strive not only to survive, but to thrive.

Many strategic solutions have emerged from discussions and planning, however, the three that we see most frequently discussed as the means of ensuring future viability are:

    • Get Bigger

    • Get Niche

    • Get Integrated

Get Bigger: The pressure to consolidate, merge, acquire, or partner is being felt by companies across every industry and sector. Increasing size as a growth strategy provides several competitive advantages: 

  • Offer increased salaries in a market where talent acquisition is difficult

  • Achieve scale to obtain the resources and capacity to innovate, make capital investment, and support further consolidation

  • Acquire and implement advanced systems that deepen customer engagement and data acquisition and management

  • Broaden service offerings, becoming a one-stop-shop to increase value to customers

  • Improve quality and capabilities by acquiring organizations that add value by improving service or quality

Get Niche:  For those organizations that lack the desire to increase in size, getting very niche in strategic focus is a necessity. Getting Niche does not mean getting small. Instead it means focusing on your ability to own a market space in a very specific area of service in which you have the ability to:

  • Own the market for the niche space you are operating in with a competitive advantage that others lack

  • Design or invest in technology solutions that allow you to improve service and the customer experience

  • Shift resources, focus, and ability, to differentiate yourself in the market towards the niche area

  • Design a strategy that will scale and grow your ability to be a leader in the niche area of focus

Get Integrated: Organizations are becoming more reliant on partnerships, collaborations, and shared services in order to survive. However, sometimes the “too big to fail” approach does not work. When this is the case, you need to look at becoming “too integrated to fail”. Getting integrated allows companies the ability to:

  • Entrench with partners to deepen relationships and share resources that may be too expensive to acquire alone

  • Bridge relationships to work more effectively for the benefit of the customer

  • Collaborate with multiple partners, strengthening relationships that could result in mergers or new models for growth

  • Share data and information to position yourself in the market across multiple companies serving a single market

Regardless of what strategy your company has decided or decides to embark on, each comes with equal benefits and drawbacks. However, there is one core theme that plays across each strategy, which is the utilization of technology. Technology is allowing us to interact, communicate, service, and work together differently. This concept may seem odd to organizations that consider themselves service providers, but we have entered a time of technological advancement that is disrupting the traditional ways we think about conducting business and providing service. 

If you are interested in learning more about the planning trends we are seeing or which strategy might be best for you and your organization, please connect with us. 

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. 

 You say consolidate. We say collaborate! 

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by Carolyn Madden

Consolidation, or the combining of a number of things into a single more effective whole, is a word we are hearing a lot in the nonprofit world. Nonprofits are currently experiencing shifts in funding, competition, and changes in consumer behavior. In an effort to save money, increase capacity, diversify revenue, and position themselves competitively, organizations are now being forced to consider sharing services, building partnerships, or merging together.

Yet, when the words “consolidate” and “merger” arise,  many are initially resistant to the notion. While there are various reasons for this, we have found there to be three common themes that arise when organizations are considering a merger: Surviving brand, Surviving Leadership, and Surviving Board. Concerns related to these three issues can dissuade organizations from considering a merger and, in some instances, it can halt merger discussions that have already begun. 

So, lets step back for a moment and approach a merger from a different perspective. While consolidation and merger are often concepts that people are tentative about,  there is a similar word that can be used that has the opposite effect. Collaboration.

Collaboration, or working jointly to produce a desired outcome,  is a word that is widespread in the nonprofit world. It inspires feelings of enthusiasm, determination, motivation, and teamwork, and it is something that nonprofits have been doing for years.

Schools work together to find ways to deliver curriculum creatively when funds are cut and materials must be shared. Human Services organizations work together when a singular organization cannot provide all the services needed by an individual. 

Organizations are constantly working together in a effort to make a difference in our communities and in our world. They are doing whatever it takes to drive their mission, accomplish their goals, and to preserve the value that they add to our quality of life and to the quality of life of those that surround us. 

As such, many organizations have a deep understanding of what they need to collaborate on, when they need to collaborate, and who their partners should be. Having said that, collaboration is often a good starting point when considering a merger. Who you can work with and how that relationship will play out, is in integral part of the merger process. Knowing and understanding this, can often make the concept of a merger and the actual merger process, less overwhelming. 

Having said that, let’s now revisit the three biggest concerns related to mergers in greater detail:

What will the surviving brand be? 
An issue with organizations both new and established, people are often tied to their brand. Brand is, after all, the visual representation of an organization and what they are all about. It makes an organization easily recognizable to those they serve as well as throughout the community. 

In the case of a merger, organizations must work together and decide on branding. For those organizations that have a history of working together, brand and mission familiarity have already been established. This will aid in the process, as individuals may be more amenable to working under a brand they are already familiar with and more focus can be placed on driving organizational goals forward rather than what the final brand will be. 

Who will retain their leadership role? 
Those that hold a leadership role in an organization are often responsible for inspiring and empowering groups of people to carry out that organization’s mission. They are also, independently or collectively, the people that are held the most accountable for an organization’s survival. 

When a merger presents itself as an option to ensure future viability, it is an organization’s leaders that are responsible to doing due diligence. While some leaders may not be familiar with all that a merger entails, most are well aware of how a merger will impact leadership roles. There will be those that retain their position, those that are reassigned, and those that will no longer have a position within the organization.  While the emotions related to this cannot be disregarded, it is important to keep in mind that a merger can often be the primary means of allowing an organization to continue the work they are doing for the betterment of society. 

Who will remain on the Board and how will they govern?
Board members, those individuals that devote their time and energy to ensuring an organization is on track with meeting its goals, are often one of an organization’s most valuable assets. Board members are there because they want to be and many of them have a personal connection to the organization they represent. 

As in integral part of any organization, Boards are not immune from consideration during the merger process. Often, the issue of who will remain on the Board is easily addressed by simply combining the two Boards. If mergers are occurring within the recommended same sector or with organizations within a value chain of activities, this should make for a more seamless combination. 

It is critical for organizations to remember that concerns, such as those discussed above, and emotional attachments can’t outweigh the benefits of a merger. A successful merger will help an organization eliminate competition, acquire talent, save money, expand geographic impact, and improve quality of service, among other countless benefits. Most importantly, a merger can ensure survival in a highly competitive marketplace and allow organizations to continue the positive impact they have on society.