The most common scenario for nonprofit mergers is when a nonprofit’s business model is not sustainable for the long term, yet the organization still has significant assets – not only financial but also its people, brand and systems. The organization has enough assets to limp along, yet recognizes that its future is constrained unless it identifies a merger partner with enough complementary assets to make the consolidated organization strong enough to thrive. In such a case, here are answers to some common questions about mergers:
Will staff lose their jobs?
Most nonprofits are not large enough for many, or any, staff positions to be eliminated. Front-line program staff are critical to provide services. Other than departures chosen or planned by staff members themselves, due to poor performance, or an inefficient function or department, most nonprofit staff members typically retain their jobs. Nonprofit mergers still create greater economies of scale and build capacity.
How do we find the right partner?
Most often, the right partner is an organization with program similarities and with whom your organization has had a relationship already. Whether the list of possibilities is geographically-based or more related to program and service synergies, you can typically perform an analysis beginning with a relatively short list.
Is the process complicated?
Let’s just say there is a lot of process involved! Mergers necessarily involve planning for dual scenarios – if the merger is successful, and if the parties decline to merge. Expectations, hopes and fears of all parties need management, and there is team building within and across organizations required, often with dual reporting relationships for some period of time.
The sequence of events and how they are framed can make the difference between smooth and rocky processes; don’t tackle trickier issues until the appropriate time.
A facilitation process should be designed to address misunderstandings, relationship problems, etc., that often involve autonomy, self-interest, politics or culture.
How long might the process take?
Depending on the size and complexity of the organizations involved, including all feasibility analysis, due diligence, continuing through the structuring of the deal, a merger may require a 3-4 month timeline for a simple set of circumstances to as long as 2 years or more for a complex set of circumstances.
Most experts also agree that full effectiveness can only be achieved years after a merger is legally closed, once the organizations have integrated systems, and ideally, have developed an effective culture as an integrated entity.
How much might it cost?
Some of the larger and more common costs may include brand/materials development, legal and consultant costs, the cost of systems integration such as financial management and I.T. systems, severance package(s), and moving costs. You may be able to seek institutional funding to cover such one-time costs.