The Nonprofit Merger Process: A Dating Game

 

Embarking on the road to a nonprofit merger may not strike nonprofit leaders as the most romantic endeavor, but it does mirror qualities of a very common practice: the modern dating game. In their workshop on mergers for nonprofits, ESC consultants Mike Stauff and Bob French use an analysis from CompassPoint Nonprofit Services’ The M Word: A Board Member’s Guide to Mergers that lays out how each step in the creation of a strategic alliance reflects human courtship, from exploring the candidate pool to engaging in one-on-one meetings to officiating a lawful union.

Step 1: Define and Identify Your Ideal Mr. or Mrs. Right
In the beginning, your nonprofit’s leadership—board, Executive Director, and other key stakeholders—should figure out the organization’s must-haves, like-to-haves, ok-not-to-haves and deal-breakers for prospective partner organizations. Individuals as well as the team as a whole should be thoughtful about their current nonprofit’s mission, management style, size, resources and other factors in assessing compatibility with another organization.

Step 2: Go Flirt
Once prospects have been identified, it’s time to initiate contact. The Executive Director, Board Chair, or both should make contact with prospective partners and begin informal conversations. Remember, flirting and first dates are all about first immediate impressions. Nonprofit leaders should be strategic in the information they share as well as the questions they ask and any requests for future contact made. This is a time to tread lightly and to keep options open.

Step 3: Explore Relationships and Date
This is the time to be focused and introspective. At this point, your nonprofit should have a committee in place that can explore the implications of specific mergers and begin due diligence. Your organization may even choose to pass an “intent to merge” resolution to the prospective partner as a signal of seriousness. This type of action promotes trust between both organizations and can act as a solidifying step in the right scenario. Remember though, as in dating, expressions of serious intent can become extremely dangerous tools when handed to more than one prospect.

Step 4: Pop the Question
You’ve explored your options. You’ve found the one. You’ve courted the organization for months or even years, and you know this strategic potential is real. Now it’s time to propose. The merger agreement, like a marriage proposal, is a non-legal agreement. There must be a document developed, approved by both boards, with the basis of a resolution of issues that lays the foundation for the overall structure and vision of a new entity. Expect this process to take anywhere between 4-12 months. Like planning for a wedding, there are many details to hash out before this partnership can be made official.

Step 5: Sign the “Marriage License”
Woohoo! You’ve made it through hammering out the details of what your partnership will look like. It’s time for legal enactment. Upon approval of the Merger Agreement, both boards must enlist their own legal counsel to manage the legal aspects of the merger.

Step 6: Celebrate Your Nonprofit’s Official Union
The launch of the merged nonprofit is an exciting time to showcase the new resulting organization. It’s also an excellent fundraising opportunity—be sure that both nonprofit’s supporters are fully aware of this special event, and that any parties that may be interested in the joining of two previously separate missions know this is a great time to give.

Step 7: Go Forth in Unity
The newlywed phase can be varied in time and intensity. With this period comes various levels of integration, for example your new organization may need to work out systems integration, staff reorganization, cross-training issues, cultural habits, team building and more. The merger process itself may call for management consulting assistance, but this time in particular can be especially smoothed through the employment of nonprofit consultants and capacity building services.

To learn how ESC consulting services can impact your eastern Massachusetts or Rhode Island nonprofit, please contact Director of Consulting Ulea Lago at ulago@escne.org or call 617-357-5550.

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