Merger Advice from Your Peers

Nonprofit mergers are sometimes seen as a last resort in the face of financial crisis, but as highlighted in this article from Stanford Social Innovation Review, “mergers and acquisitions can be more than an escape plan, and instead help nonprofits preserve their mission and expand their impact.” On the flip side, nonprofits sometimes experience external pressure to merge or consolidate when it may not be the right time or choice.

We know from our recent member survey that some nonprofits are considering mergers so we reached out to our network to crowdsource tips, lessons learned, and any insights from organizations who have already gone through a merger. Responding organizations included land trusts, arts organizations,  and health and human service organizations of varying budget sizes and geographic locations.

Here’s what your peers had to say:

What were the motivating factors for the merger?

• “1)  Greater efficiency, sustainability and expansion of mission.  2) Restructuring on a national level to create greater reach, consistency of operations and greater efficiencies.”
• “Efficiency, effectiveness, better use of limited resources, greater brand awareness, ability to offer year-round programming (and thus advertising), access to bigger grants (because of a bigger budget).”
• “To streamline duplicative administrative and operational systems, to develop specialized staff (marketing, development, admin) that could serve the whole as opposed to individual E.D.s having to “do it all,” to expand collaborative programming, to better serve our patrons.”
• “Three of the four nonprofits were all volunteer and wanted to professionalize through merging to have staff.”
• “Strengthening programming, providing more comprehensive services, sustaining underfunded services, retirement of leadership staff, ensuring competitive wages.
• “Revenue loss and administration costs.”

What’s one piece of advice you would give to others considering a merger?

• “Take care of the CEO/Executive Director – first.  This could be in terms of strong severance packages, assurances of new roles, etc.  They have to be able to lead the process.”
• “Think through all the angles and talk to all the stakeholders. Listen to their concerns.”
• “Spend the time to focus on organizational culture and to build trust and transparency amongst the leadership/transition team.”
• “Talk with other organizations who have been through the process. Have a lawyer who specializes in mergers who can help with updating the bylaws and the merger documents. Have a facilitator to bring together the leadership of all groups to build trust, listen to each other, and make sure all concerns are heard through the process. Move slowly, at the speed of trust.”
• “Always keep the combined strength of the work in mind. What more could you achieve together? How do you then get there?”
• “Do your due diligence. Have a plan and stick to it. Complete a “memorandum of understanding”. Should be done in a timely and orderly fashion. There are many good checklists that should be utilized. Do not rush into something that could damage your Goodwill. Legal, CPA and other external professionals should be involved from the beginning.”

Anything else that would be helpful to share?

• “Don’t underestimate the change of cultures that comes with a merger.  Plan, plan, plan and keep employees informed.  It will take longer than you plan.  Culture eats strategy for breakfast.”
• “Go for it!”
• “The four nonprofits [that] we merged into one have been a huge success. The result is all programs have become stronger and we are providing more services than we did as 4 separate organizations.”
• “Don’t assume that a merger is going to save money; ours resulted in increased expenses but also expanded programs and happier staff. We are hoping that the earned income will increase over time, but we will always depend on contributed support.”
• “Merger work is very hard but is worth it if it can be done in a way that possibly impacts services available to the community. Don’t give up!”
• “Get all stakeholders on board and going in the same direction.”

Plus, find more resources on mergers in MANP’s free resource library. If you are interested in connecting with other peers who have gone through mergers, please contact membersupport@nonprofitmaine.org.