Nonprofit Merger

 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.

Merging Non-Profits is a Journey of Endurance

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Acquiring a non-profit organization is a bit like running a marathon – it takes plenty of patience, stamina and perseverance.  The definition of endurance is the ability or strength to continue or last, especially despite fatigue, stress, or other adverse conditions.  This certainly defines my experience with merging or acquiring non-profits!  One never knows how long it will take, how tired the parties will become, how stressful and demanding it can be (especially given other responsibilities), and how many unexpected challenges, large and small, arise in the process.  However, like a marathon, the journey always provides great insight, increased strength, enhanced confidence, and a celebration at the successful completion.  So, let’s explore that journey.  

To embark on the merger journey, one must be willing to take risks.  The entire process, including the outcome, carries risks that can halt the merger completely.   Perhaps the biggest risk presents itself at the start of the journey.  Consider all that one has to evaluate prior to deciding to run (or not!) a marathon. The same can be said for taking on a merger. Considerations such as the mental and physical toll, financial implications (fundraiser), and environmental impact must all be explored and addressed.  

As a CEO, making a decision to acquire another entity is so much more than a growth consideration.  It requires an evaluation of resource capacity, financial stamina, risk-mitigation, culture challenges, and, most importantly, passion.  I can objectively answer most of these evaluation areas with numbers, charts, process tools, and logic, with the exception to this being passion.  In my opinion, passion is the most critical part of the evaluation.  I ask myself the following questions – Do I believe in their mission? Will I be proud to speak about their legacy? Are they, or do they, have the ability to meet my quality levels? Do they fit into our strategic plan? Will my Board support it? And finally, will I be proud to welcome their clients and staff into our non-profit?   These questions are always the most challenging but they provide the pivotal point on merger decisions.  All of them must be a resounding YES!

What is “due diligence?”  Not only is it the next phase of the journey but it is where the detailed analysis take place.   This is a pain-staking process that cannot be underestimated in terms of details, follow-through, and evaluation.   Running a 26 mile course requires a thorough understanding of all conditions one will face so that a good decision can be made. Where the first part of the journey is about fit, mission, and passion, this process is all about numbers, facts, statistics, and truth.  Seeking the truth and understanding the liabilities (all types) becomes the cornerstone of a strong merger.  Again, there are risks.  Decisions will need to be made about learnings – some will require more resources, some will be deemed inconsequential, and some will cause the merger process to end.  If you get through this phase successfully, consider yourself fortunate!

So you’ve decided to run or merge – now the risk becomes more significant!  You must now follow it through and move into full action.  If you are running, get to the starting line and put one foot in front of the other – quickly!  If you are merging, let the myriad of steps begin.  It can feel as fast and exhilarating as a marathon at times, as well as slow, demanding, and never-ending like a marathon.  There are many legal, financial, human resources, communications, and logistical steps that have to be perfectly executed and completed on-time.  This is where the passion comes back into the picture to fuel the need to push through this process with precision.  The closer the merger date gets, the more intense, tired, and stressed it can become – just like the last six miles of that very, very long run! One begins to wonder if it is truly worth it, as new obstacles come into play on a daily basis.   Patience, stamina, and perseverance become the mantra and the CEO must lead by example.   

As you cross that finish line or get the stamped Secretary of State confirmation of the merger, it is met with exhilaration, exhaustion, and a true appreciation for a job well-done.   Suddenly, the weight of many months of planning and worrying are gone – it is complete and feels great!  Like a warm-down after a marathon, much of the closing work still needs to be completed so while it is not over, it definitely feels calmer, within control, and executable.  It truly is time to celebrate! 

So if you think you have what it takes, start your journey, create your path, run fast, and with great heart….
By: Anne Colwell, CEO Cape Cod Child Development