Real learning gets to the heart of what it means to be human. Through learning we become able to do something we never were able to do.
― Peter M. Senge
― Peter M. Senge
Basic Terms:
Merger: This is the term of art that most easily communicates the idea of more than one organization coming together under one roof. However, legally, the term merger is no longer commonly used. Strategic Alliance: This is currently the term-of-art for the range of options that nonprofits can look at when considering combining forces. These alliances can range from formal program or administrative partnerships on one end to a complete organizational integration. (link to chart) Asset Transfer: When two organizations decide to unite, the Asset Transfer (or the related Asset Donation or Asset Acquisition) is the legal contract used. Rather than the historical merger, the Asset Transfer process moves resources and intellectual property from one organization to another. Wind Down and Dissolution: When an Asset Transfer is complete, usually the combined effort retains the name of one organization. The other organization usually goes through a process of legal wind-down and dissolution. This includes satisfying all of the organization’s debts, archiving necessary contract and financial paperwork, and filing legal paperwork with the government. Some Things to Consider Financial Outlook: In this volatile economic and philanthropic environment competent organizational leaders are asking themselves and their boards about their organization’s future. For many years, I’ve recommended that organizations do conservative three-year budget projections which over-estimates expenses and underestimates revenues. It’s critical to ask the difficult questions and take an honest look at the environment. Depending on your projections your organization might consider anything from seeking to take on a programmatically strong but financially weaker partner or looking for a financially stronger organization that would adopt your mission. Leadership Change: There doesn’t ever seem to be a good time for ED’s and senior leaders to transition out of their jobs. Before jumping into a transition process, boards should discuss if a strategic alliance should be considered. Bringing on a new leader is a high-risk, high-return endeavor often taking 12-18 months before revenue, expenses and staffing stabilize. Aligned Missions: Nonprofit organizations are like snowflakes – each and every one different in their own right. There truly are no two that are exactly alike. And yet like snowflakes, while nonprofits are unique many have countless ways in which they align. Mergers in the nonprofit sector are most often between organizations that share a passion for a population or for solving one of our society’s many intractable problems. When we put the needs of the populations we serve at the forefront of our analysis, we often see those similarities come to the forefront. Who leads the conversation – board or staff? This is a question we hear often. Of course the answer is that it depends. Based on our experience, conversations about mergers are often raised when there is a strong and trusting relationship between the CEO/ED and Board. That said, in the majority of cases, conversations about potential merger options are often led by staff leadership. However, there is no merger without the involvement of the board. Our approach in working with organizations is to identify many inflection points where decision makers – in particular the boards – agree to continue with exploring a process of alignment or merger. How long should the process take? This is another question where the answer is dependent on many factors. We think it’s safe to count on a 3-6 month process. The speed of the process is dependent on a number of factors including negotiation time, board meetings, the legal process, etc. Do we need a consultant or can we do this by ourselves? For many years, we’ve recommended David LaPiana’s The Nonprofit Mergers Workbook. We recommend that all our clients get this book and review it. Most information on nonprofit mergers you’ll find on the web is based in their work. In the book, you’ll find that LaPiana generally recommends using a consultant. A new tool from BoardSource also includes a "Do We Need a Facilitator" section in their new guide to strategic partnerships. . Will our funders pay for a merger exploration? More and more philanthropy is willing to support organizations in exploring mergers even when they don’t end in a merge. When contemplating asking for support, it’s useful to know that what pieces to ask for. The good news is that for most nonprofits free legal counsel is available. The main costs for the nonprofit are the consultant (if you have one), staffing and wind-down costs. Additionally, it’s useful to think about post-merger costs to help with cultural and programmatic integration. Comments are closed.
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