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Two Become One: Mergers, Etc. Karen Eber Davis

September, 2010

For the last few months, I have been working on a project to help nonprofits to explore mergers as an option to enhance their futures.  The following are insights from the project’s readings and discussions.  Even if you never consider a merger, you will find the concepts useful because working with other nonprofits is a keyway to increase resources for your mission.  Also, the insights apply to more than mergers; they apply to all inter-nonprofit strategies. 

1.  Understand Mergers’ Full Potential

While long perceived as a way to help struggling nonprofits survive, Alexander Cortez, William Foster, and Katie Smith Milway, in their article, “Nonprofit M & A: More Than A Tool for Tough Times,” share that mergers can, “strengthen your effectiveness, spread best practices, expand your reach… and do all of this more cost effectively.”  The authors offer examples of healthy organizations that seek and court merger opportunities to add services or offer them in new locations.  Have you ever looked at other nonprofits and asked, “Whom might we merge with to become stronger and more effective?” 

To expand your thinking about mergers, explore how others use mergers to create more mission.  Start with this database at the Foundation Center (http://foundationcenter.org/gainknowledge/collaboration/).  It’s based on data from submissions to the Lodestar Foundation’s Collaboration Prize.  David La Piana also provides a number of helpful books about merging.  Review Jean Butzen’s Mission + Strategy = Social Value Blog.  Make it your goal to see the big picture about mergers to broaden your options and inspire new possibilities for your nonprofit. 

2.  Benefits First

I came to the project with the conviction that benefits needed to be the first work of collaborative efforts.  Over time, my conviction has grown.  Interactive nonprofit relationships, especially mergers, require substantial efforts to succeed.  Nonprofit leaders are busy enough without new burdens.  However, to remain competitive, all nonprofit leaders find time for activities to improve outcomes.  Knowing the benefits and your odds of achieving them can help to provide energy for the effort.  A list of potential merger benefits includes:

To better pursue your mission. 

To increase efficiency of service delivery. 

To create more strategic fundraising. 

To develop a more stable financial outlook and improved sustainability. 

To obtain greater market share. 

To create a staff large enough so job functions can be specialized. 

To obtain economies of scale. 

3.  Find Strong Partners

Once you decide that a merger is a good idea, your next step is to find strong merger partners.  Yes, this is intentionally plural.  Identifying more than one potential candidate will help you to expand your thinking about mergers, to be selective, and to step away from any specific interactions if negotiations falter. 

Here are several success indicators to look for in strong potential partners for your organization:

You successfully worked with them in the past.  The work can be everything from the two executive directors getting together frequently for mutual support, to joint programming, trainings, or administrative activities.  CASL and Renaissance Manor, who merged last year, worked together for several years to acquire, improve, and manage their respective properties. 

You see evidence that they work well with others.  Your proof can be stories shared in their website, press releases, or even professional acquaintances who report successful endeavors.  Working well with others is a skill that organizations grow.  Joint efforts, like mergers, stand a greater chance of success if each partner has honed their working-with-others skills. 

Their mission isthesame, similar, or complimentary to yours.  This is easy to test.  What does their mission statement say?  To become the regional organization it is today, Big Brothers and Big Sisters of the Suncoast, over the last decade or so, has experienced five mergers with different local Bigs.  All of the partners started with a similar mission statement. 

Their philosophies compliment yours.  Matching philosophies are much harder to discern than complimentary mission statements.  Outsiders and even stakeholders not familiar with the details of each organization’s philosophy often fail to perceive any differences — and the passions associated with them.  In a merger, both groups must create a joint working philosophy that ideally combines elements of each.  One fundamental question is their theory of change.  Does it match yours? ( How do people change?  How are people helped?  What is the role of a nonprofit organization in this process?  What kind of help is needed?  What help is best?)  As a counseling service, for instance, you believe that people teach each other and that group interaction is essential to your outcomes.  A potential merger partner believes that people need an expert guide and that the outcomes they achieve are because of their staff’s expertise.  Creating a successful merged organization will involve designing services that reflect both approaches to create outcomes.  Next to trust issues and financial concerns, this is why mergers fail. 

Successful partners follow through on commitments.  A group may be the best organization in the world, with a great mission statement and brilliant philosophies, but if they are so frazzled they can’t remember a meeting you agreed upon two weeks in advance and sent a reminder about yesterday, it doesn’t bode well for a positive and smooth merger experience.  This is a practical consideration.  What is it like to actually work with them? 

4.  Benefits for Them

Part of strategizing mergers involves helping your potential merger partner to see positive outcomes from merging.  Early in the process and as you work together, list specific benefits your partner stands to gain.  Review the list in Step 2.  Take time to write a customized record of benefits, from their perspective.  No one wants to dance if they can’t foresee a good experience.  Help them to “see it” by creating a list of opportunities.  As you work together, share your list and continue to modify their list by clarifying gains.  This will help to increase trust.  Having each party’s benefits to review will help you to stay with the process as you hit unavoidable bumps. 

5.  Learn, Especially About Trust

With the framework of benefits in mind, learn about mergers, common challenges, success, time lines, trust, and change management.  Learn what mergers entail so that you can set realistic expectations.  These are not done-in-a-day projects.  Yes, there will be a lot of paperwork.  However, in the coming together of two or more divergent parties, the paperwork is a formality.  It has been said, and it’s certainly true in mergers or any significant joining, “The soft side is the hard side.”  Mergers involve significant emotional content.  Questions like these are raised, some said, some unsaid: “Is my organization going to be taken care of in the merger?  Will the values we hold dear be honored?  Will my staff and volunteers recognize this as an enhancement of the way we achieve our mission?  Are we safe?  Am I safe?”  For help on trust building, see this article, http://www.kedconsult.com/wp-content/themes/kedconsult/newsletters/may-2010.php.  While its focus is on donor trust, the lessons apply to mergers, too. 

An Option

As you consider ways to increase the resources of your organization, merger is one option to consider.  If you decide to pursue a merger, remember that, “All labor that uplifts humanity has dignity and importance and should be undertaken with painstaking excellence,” (Martin Luther King, Jr.).  Merging with another nonprofit organization requires this excellence. 

Looking for additional resources about mergers to help you in your efforts?  Contact us today about developing a merger strategy for your nonprofit and see these additional resources:

1.  Planning Document: A useful form to help you to decide and record all of the details you need at your meetings.