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Mergers and Strategic Restructuring

“Alone we can do so little, together we can do so much” ~ Helen Keller

According to the National Center for Charitable Statistics, more than 1.5 million nonprofit organizations exist in the United States. Many organizations have very unique missions or serve very specific geographic areas, but we can all think of examples where organizations with similar missions or serving similar clients are competing for limited resources. But there are organizations recognizing the benefits of cooperation among organizations.

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Combining resources through a merger or other strategic restructuring may be one way to increase the strength and reach of an organization while increasing administrative efficiency. But how does one go about exploring and/or actualizing such a significant endeavor? According to La Piana Consulting, it can be one of the most strategic efforts a nonprofit can make. 

There are three areas to such an endeavor and the firm provides an excellent toolkit to help guide the process. One of the first steps is to create a team to shepherd the research and plan development. The makeup of the group should include one or two board members, the executive director, and key leadership team members.

  • The Evaluation – Start with Why

    There are many ways for nonprofits to partner in a strategic way and one is to combine all resources to level up services.  However, understanding the end goal by assessing the intention and viability is key to determining if a merger is that destination. For example, if you are looking to pool a collective knowledge base and eliminate redundant service it may make sense to join forces. How ready is your organization to make such a move?

  • The Negotiation – The Art of Agreement

    Here lies an opportunity to take a deep dive on how the organizations might work together by aligning resources and missions. The ultimate goal is obtaining a clear understanding with parties that the merger will make sense to both organizations.

  • The Integration – Putting the Pieces Together

    At this point of the process is bringing together all the various components to launch the newly merged entity.  It is at this point that proof is in the pudding – success or failure.  It looks at how the board, operations, finances, programs, staff, and infrastructure all sync up to become a fully functional organization.

Another key activity is how to communicate changes internally as well as externally. Staff, volunteers, and program participants should not be surprised by the changes and be part of the process.  Community stakeholders and funders should also be made aware of the merger in appropriate fashion. For example, how and when you notify a foundation that has awarded your nonprofit a large amount versus notifying your donors will have a different timeline and amount of information you will disclose.

As with any great idea, there are also possible challenges and pitfalls to consider.  Some many consider a quick move without practicing due diligence and investigation in the beginning of the process. Here are some other items to consider:

  • Always include staff in the process.
  • Recognize the culture of the organization.
  • Determine the level of confidentiality.
  • Consider the impact on stakeholders.
  • Identify all the costs associated with the merger.
  • Understand the required signatures needed for the documentation.
  • Plan for new systems and integration of staff.

If your nonprofit is looking at a potential merger, consider the strategy behind the pursuit. Are you looking to grow the organization to increase revenue and/or reduce expenses? Conducting your due diligence and thorough planning can lead to a successful collaboration. Knowing all the actions required is also necessary. Knowing how the change will impact your community is equally important.

In our next blog, we will explore some examples of mergers and lessons learned in the process.

RESOURCE LINKS

www.lapiana.org

nonprofitlawblog.com/nonprofit-mergers-tips-traps

www.pnc.com/insights/corporate-institutional/manage-nonprofit-enterprises/nonprofit-mergers-and-acquisitions.html

Posted in Board Training, Planning.