Nonprofit Mergers

Merger Announcement: Elder Services of the Merrimack Valley, Inc. & North Shore Elder Services

Please join us in congratulating our client, Elder Services of the Merrimack Valley, Inc. on their merger announcement!

The Boards of Directors for Elder Services of the Merrimack Valley, Inc. and North Shore Elder Services have announced their intention to merge these two organizations effective July 1, 2019. 

Elder Services of the Merrimack Valley will remain the sole entity of the merger agreement and continue operations at both current locations in Danvers and Lawrence after the July 1st merger date. Services in the communities of Danvers, Marblehead, Middleton, Peabody, and Salem will continue under the name, North Shore Elder Services. Joan Hatem-Roy will be the Chief Executive Officer for the combined organization.

This merger brings together two strong, highly regarded aging service organizations that have been serving older adults and their families in northeastern Massachusetts for more than four decades. The combined strengths and resources of these two organizations will create many opportunities for innovative and expanded services.

The success of this merger must be credited in large part to the incredible Leadership from both organizations, working together to unite their Staffing Teams and organizational cultures. 

At Curtis Strategy, we feel privileged to have been chosen as the facilitator and advisor for this merger, working collaboratively to bring these organizations together. We would like to thank the Leadership and Staff that we had the opportunity to work with throughout this journey, and we wish them great success as they forge ahead as a united Team. 

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. 

3 Major Trends That Nonprofits Need to Know Now

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As nonprofit leaders create their business or strategic plans to guide their organizations through the years ahead, it is important to understand that the landscape within each nonprofit sector is changing rapidly.

Imagine advancements in technology that will allow for-profits to impede the nonprofit world. Imagine the service models of every nonprofit sector changing in ways that organizations are not able to conceptualize in their strategic planning. Imagine massive consolidation of nonprofits within the next 5-7 years.

The pace and direction of change is evolving in such a way that many organizations will be left unprepared to respond.

This creates a significant challenge for nonprofit leadership. In order to ensure future viability, leaders must find a balanced approach to time management. They must manage their organization effectively while simultaneously aligning it to the major trends reshaping the nonprofit world. These trends must be a part of Board conversations, strategic planning, and business model adaptation. 

Currently, there are three major trends shifting the landscape within nonprofit sectors: Customization, Decentralization, and Integration.

Customization
The advancement of technology is now allowing companies to capture deeper levels of client data. This affords these companies the ability to create customized services and solutions at a person-centered planning level. Behavioral data gathered from smart phones, wearables, sensors, and other solutions are beginning to tell the story of who we are as individuals. Data is captured, stored, and run through a system of analytic solutions with the goal of being able to support people at a personalized level. For example:

  • Healthcare: Electronic medical records, wearable devices, and analytics work to gauge eating habits, exercising habits, lifestyle, and a variety of other factors, with the goal of providing feedback at an individual level. This can be utilized for preventative healthcare or for providing more accurate and higher quality direct care. 
  • Human Services: Similar to the healthcare solutions, organizations that provide long-term support services, behavioral health, and housing can capture data through multiple channels and make changes to service models to improve the level of impact and increase the probabilities of positive progress and/or care.
  • Higher Education: Understanding how students learn as individuals, and the pace at which they learn, will allow for the customization of curriculum delivery through the use of technology. This will dramatically change the learning experience and alter the landscape of education.

An additional shift that is occurring in relation to customization, is that organizations will need to develop program or service differentiation. Organizations must have a more niche focus as opposed to the traditional broad approach to service. For example, if a college or university is widely known as providing exceptional nursing and teaching degree programs, why shouldn't that institution start to build a niche focus or competitive advantage around that top tier strength?

Another major trend that is also supported by the advancement in technology, is decentralizing services.

Decentralization
Uber and Bitcoin are two prime examples of the decentralization of transportation and financial industries. These massive disruptions and countless others, are being driven by technology. 

Solutions, such as Uber, are impacting thousands of companies and State Agencies around the country and worldwide. One singular technology concept could consolidate thousands of companies under one smart phone application and create thousands of jobs as a result. The same is happening with Bitcoin. It is a peer-to-peer financial solution that removes the need for financial institutions. Yet another technology concept that could consolidate thousands of banks and financial service companies. 

The common thread to these solutions is that technology is without boundaries and is collapsing industries. Think about amazon.com. What industry would you classify it under? Retail, food, or transportation? Data storage, entertainment, advertising? E-commerce, banking, or healthcare? 

The fact is, technology is collapsing many industries under one solution, Nonprofit organizations can be at the forefront of these new technology solutions or gobbled up as a result of not being intentional when designing their own future.

How will decentralization impact the nonprofit world? The dramatic shifts in funding at the State level is going to force organizations to figure out ways to move programming and services out of brick and mortar institutional walls, and drive it towards peer-to-peer technology solutions. Think of the costs and overhead associated with a program or service. There is physical space, employees, utilities, among many other budget considerations. What if peer-to-peer technology solutions could be created as a new way of delivering service? Organizations could use their existing business and service delivery models to build a technology solution that empowered community residents to service other community residents. 

This may seem like a foreign concept but for-profit organizations have already begun to develop solutions that will transform many nonprofit models and may even ultimately become competition. Given this trend and the impending change, organizations should consider their strengths, develop a niche focus, and determine if it can be built into a decentralized technology solution.

Another major trend that is occurring as a result of major shifts in funding, is the integration and consolidation of nonprofits across the country.

Consolidation & Integration
According to the National Center for Charitable Statistics, there are more than 1.5 million nonprofit organizations registered in the United States. 33,900 of those are located in Massachusetts. Human service focused nonprofits account for 6,300 of these Massachusetts-based nonprofits.That translates to 6,300 organizations seeking funding from the same Federal, State, Foundation, and Philanthropic sources. These nonprofit organizations vary in size, scope, geographic reach, services, and financial need.  As the number of nonprofit organizations has grown, it has become clear that they may no longer be financially sustainable. While technology is creating opportunity to customize and decentralize, it is also creating the need for organizations to share services, build partnerships, or merge together in an effort to save money, increase capacity, diversify revenue, and position themselves competitively. 

Throughout the last several years, we have seen mergers in Higher Education, a sector that has traditionally not been known to consolidate. We have seen massive mergers in Healthcare, and are starting to see Human Service agencies integrate. Boards of Directors and Senior Leadership need to begin discussions about working with other organizations in the same vertical market or expanding across horizontal markets that would add value.

The three major trends impacting all nonprofits are real and are happening today. The way and manner in which we prepare for the next 5 to 10 years will be dramatically different then what has been done in the past. We must challenge ourselves to think and act differently in order to preserve the value nonprofit organizations have on our quality of living and the people that surround us.

By Eric W. Curtis

Creating Wins & Community Success Through Mergers

By Anne B. Colwell, CEO
Cape Cod Child Development

“Merger” and “Acquisition” seem to be scary words in the nonprofit world, but invigorating words in the for-profit arena.  Could it be the mission-driven nonprofit world is more focused on a smaller, targeted service?  How about the theory that a for-profit organization is just simply more competitive and wants to grow revenue?  Nonprofits are seen as softer, kinder entities, and acquisitions give the impression of negativity and loss.  For-profits may be viewed more as a business model that acts in a manner that drives profit, sometimes at the expense of human capital.  Perhaps the types of professionals that lead organizations tend to fall into two general motivational categories—intrinsically and extrinsically valued.  There, of course, is no actual clear answer—only the remaining question about why the concept of creating more greatness by combining resources has not taken hold in the nonprofit world in the same way as in the for-profit world.

As the CEO of a nonprofit on a 70 mile peninsula with two small islands (good guess—Cape Cod!) and over 1,000 nonprofit agencies, it is clear we can see the opportunities for (nonprofit) mergers and acquisitions.  Our agency is one of the largest nonprofits in the region, especially within the child and family services sector.  Roughly two-thirds of the Cape’s nonprofits provide services to children and families with significant overlap of services and missions.  All of these hundreds of nonprofits have CEOs/Executive Directors and most have financial/human resources management, marketing, development, and administrative support staff—all functioning outside the direct services provided to clients.  Many of these agencies have outstanding leadership and staff but, conversely, many do not.  Many are utilizing effective technologies, evidence-based practices, and good operational excellence processes but, in reality, many probably are not.  There is only one fair reality when we look from afar and in general terms—the total amount of money available is not being spent in the most effective ways.  We know this by just simply looking at the administrative costs of running so many nonprofits in a relatively small geographical footprint.

Let’s take a closer look at the nonprofit world.  In any given year, there will be a dollar figure that accounts for all the financial resources and funding opportunities for nonprofit entities.  It is a sizable figure, relatively speaking, whether it is international, national, regional, or community-based.  At the end of every year (fiscal or calendar), it represents the total investment in the nonprofit service-based sector—regardless of the source of revenue.  If one considers the holistic approach, it is very logical to want to combine all nonprofit revenue streams into one number and understand the value of what that revenue truly means to a community or larger scope, as appropriate.

When we think about potential mergers and acquisitions, we must first consider a collective impact mindset.  If we merge, will it create more services, better quality, enhanced employee satisfaction, improved productivity, or an enriched customer experience?  We seek a win, win, win situation (triple wins), meaning it is a win for all agencies, a win for our agency, and, most importantly, a win for our children and families.  We know we can create more operational efficiency and lower administrative costs but there also must be a mission-driven connection to helping the same demographic.

Not all mergers and acquisitions are losing propositions for human capital—people!  In fact, many mergers and acquisitions provide far greater opportunities for growth and intellectual stimulation.  Although there may or may not be some transition of leaders and staff, in my experience, the newly merged entities realize new outcomes, different challenges, and professional growth that could never have occurred in the previous agency.

As nonprofit agencies struggle with Executive Director Transitions, reduced funding/revenue, and increasing administrative burdens, the answer may well lie in a merger or acquisition.  Yes, it is daunting, scary, and unfamiliar to navigate a nonprofit merger, but the benefits can be dramatic for a community.  The greater ability to provide much-needed food, housing, health, education, clothing, referrals, and all types of services to children, adults, and families can dramatically outweigh the doubt to move forward.

If mergers are not possible, another great option to consider is strengthening strategic partnerships, shared services, and collaborations.  Why not combine efforts, space, and talent if you serve the same demographic in the same area?  Identify the cross-over points of services, how each agency brings unique products/services to the community need and work together to provide more that is similarly missioned.  There may be nothing more impressive to donors, funders, and foundations than to see nonprofit agencies working smarter together.

In the nonprofit world, we are definitely “better together” and “stronger united”—let’s all consider an approach going forward, whether a merger, an acquisition, a strategic partnership, or a simple collaboration, that can change our communities … the world is waiting!

Nonprofit Disruptors

Over the past decade we have been helping nonprofit organizations design strategy, business models, and implementation methods to align to the future. We are entering a period of massive disruption to all nonprofit sectors, and the pace of change is accelerating. The landscape of all nonprofit sectors is changing, which is being driven by two major disruptors: Consolidation and Technology.

Consolidation: Regionalization, partnerships, mergers, collaborations, shared services, synergies, networked approaches, joint ventures, and many other types of concepts that bring nonprofits, municipalities and private organizations together is becoming a necessity for survival and achieving greater mission impact. Consolidation is being driven as a result of market saturation, donor demand, cost savings, talent scarcity, greater capacity demands, succession planning, and the support of struggling nonprofits. 

Technology Disruptors: Robotics, automation, big data, shared systems, IT systems, applications, and data management are all changing the business models of many sectors. These technologies are driving discussions around improved service, customer centric service, and the ability to customize experiences, while evaluating those for improved efficiency and effectiveness. 

Both of these disruptors will require strong leaders to move their organizations forward to align to the future and ensure relevance. The transformation of business models and strategy will be significant and necessary, so do not wait to start having discussions about these disruptors and how to position your organization.