November 20, 2017
 
Ten Keys to Nonprofit Merger Success

Nonprofits merge for a variety of reasons, including saving costs or creating greater operational efficiencies, but the most successful mergers are those that focus on three things: mission, mission, and more mission.

A recently completed study of nonprofit mergers, commissioned by Mission + Strategy Consulting and researched by the J. L. Kellogg School of Management at Northwestern University, which looked at 25 nonprofit combinations in the Chicago area, holds lessons for nonprofits everywhere.

Here are the top 10 keys to merger success developed by the study:
  1. Trust is the glue that holds together all other issues in merger negotiations.

  2. Mission, mission, and more mission: the most successful mergers are mission-driven.

  3. In the most successful mergers, all parties are clear about their organization’s overall goals and use the merger as a strategy to achieve those goals.

  4. Know yourself and know your counterpart: participants should make sure to acquire as much information as possible about their potential partner.

  5. The CEO is often critical in prompting discussions about a merger strategy, especially when the CEO position is in transition.

  6. Boards/board chairs must be merger advocates for mergers to succeed.

  7. Staff involvement, particularly management, is critical to the success of a merger and certainly to post-merger integration.

  8. Leaders must pay attention to cultural alignment, pre-merger and in the merger integration process, if the merger is to succeed.

  9. Most successful mergers rely on outside experts, who may include attorneys, accountants, merger facilitators, and/or others.

  10. Mergers participants must do their homework regarding all aspects of the process and become familiar with merger strategy.
The study, reported in Mergers as a Strategy for Success, recommends the following for merger participants:
For board members: Adhere to mission; be clear about the merger's purpose; be prepared to lead and manage the merger process; seek outside expertise.

For CEOs and executive staff: Prep your board on the critical issues your organization faces as it goes through the merger process; set a vision for the merger with clear objectives and expectations.

For funders: More transparency and greater clarity regarding funder policies on mergers and merged organizations; greater financial support to help merging organizations navigate the process; better communication and collective action among funders and merger supporters; proactive use of leadership experience and wisdom of those who have gone through a successful merger with those who are new to the strategy.
"Understanding the thorny issues that arise during the merger process and learning how these issues have been successfully resolved can be extremely helpful for those considering or engaged in a merger," the study noted, and highlighted the following critical issues that prospective merger partners should bear in mind:
  • Finding the right partner is a challenge.
  • Staff retention difficulties arose in almost all cases.
  • Program continuation and legacy concerns can be difficult.
  • Board member transition and retention to the merged organization is commonly an issue.
  • Liabilities must be carefully investigated and vetted to determine their impact on the future organization.
  • CEO/ED succession can be contentious and even controversial between organizations.
  • The naming and branding of the new organization is often a difficult issue.
  • Integration requires careful planning between the parties.
  • Funder involvement produced mixed responses from participants.
See the full report.
October 2016

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