organizational mergers

It seems discussion of non-profit mergers is becoming more prevalent of late. I recently became aware of a research document created by Wilder Research and MAP for Non Profits looking at what factors contribute to or inhibit the successful merger of non profits in the pre-merger, merger and post-merger phases.

There were actually some parts of the document, What do we know about nonprofit mergers? Findings from a literature review, focus group, and key informant interviews, that were very familiar. So much so I thought perhaps I had already written a blog post on it already. It doesn’t seem that is the case. However, since their report includes a literature review in addition to surveying they conducted themselves, it is likely I read some of this before.

They raise some good questions and provide some interesting advice on many aspects of a merger on issues like the name of the new organization, getting a third party involved to shepherd the process, doing due diligence on each other, issues about conflicting organizational cultures, creating a clear time line for the process.

One suggestion they had was to involve your top five funders in the process in order to gain their investment. That may be very sound advice as at least one case they mentioned found that most funders treated the merged organization with its newly expanded capacity as if it were one of the constituent entities effectively cutting their support in half.

Many organizations chose to merge as a result of some sort of crisis, either the loss of leadership, financial problems, change in the operating environment, etc. According to the research, one of the worst times/reasons to merge is if one organization is at the brink of financial ruin. Other than the fact that the new organization will inherit the problems of the troubled organization and that it is not prudent to negotiate anything from a position of weakness, research shows that even mergers between relatively sound organizations don’t necessarily result in a financially stronger combined organization.

The following are areas that they identify as needing to be addressed during the merger phase. There is a similar list for the pre- and post- phases.

2A. Key stakeholder involvement
2A1. Executive staff champion
2A2. Board commitment to the merger process
2A3. Client, consumer, and funder involvement in planning

2B. Role of staff in merger process
2B1. Staff involvement in planning
2B2. Communications with staff throughout process
2B3. Staff’s perception of the effect of the merger

2C. Integrating formal and informal structures
2C1. Attention to cultural integration
2C2. Attention to board and mission integration

2D. Providing due diligence to the process
2D1. Clear decision making process
2D2. Clear and realistic time frame

They provided the following factors which contribute to a merger’s failure:

-Lack of capacity, sophistication, or skill in the board or executive leadership
-Leadership’s inability to communicate well or to effectively influence others
-A weak or declining balance sheet or imminent financial collapse of one organization
-Programs or services that are not particularly unique or of distinctive value to the community
-Organization’s fear of losing autonomy or change
-Differences in governance, culture, or mission
-Board and staff opposition to the idea of merger
Engagement purely for survival, not from strength
-People involved do not see the real work involved in a merger
-Loss of key leader during the process