Many associations these days turn to mergers to preserve a presence for their members. The reasons are largely financial: one or both of the associations realize they cannot continue to be standalone, or the industry they represent can no longer support multiple associations, and membership dwindles in both. These are good, legitimate reasons to merge, and there are questions to ask before considering a merger.
But consolidation does not have to be a product of dire straits. Healthy nonprofits can choose to merge because the new organization can actually be a stronger voice or resource than two, smaller groups that have overlapping missions. Also, a merger brought on by strategic planning can be identified and facilitated by outside sources that can play matchmaker between like-minded nonprofits.
In the article "Bringing Mergers and Acquisitions to the Nonprofit Mainstream " (Philanthropy Magazine, spring 2009), Alex Cortez, William Foster and Kate Smith Milway outline the benefits of a strategically planned merger: improves efficiency, increases funding, develops new skills, and allows the surviving organization to enter new geographies. For example, a child services organization in Arizona started out 10 years ago with a $4.5 million budget serving residential services in Tucson. Its mission called for serving children before they entered residential services. Because the organization did not have the staff expertise or brand name to expand its reach, it began to acquire other organizations that could bring these elements. Today, the organization has a $40 million budget and serves children primarily out of residential services.
How do organizations go about finding other nonprofits with which to merge? According to the article, funders of nonprofits can play a role in this. By assessing their portfolios in fields that are conducive to mergers and acquisitions, funders can see if their grantees could benefit from mergers, particularly the stronger associations. Funders also can invest in intermediaries that can create a more efficient "organizational marketplace" through which nonprofits can identify potential merger options safely.
After two organizations have decided to consider a merger, there are questions that need to be answered, according to "Mergers: 10 questions to begin the discussion" (Association TRENDS Feb. 14, 2013) by Jerald A. Jacobs, Esq. Among them:
- Do the advantages of merging overwhelm the advantages of continuing separately?
- Does support for a merger emanate from only discreet segments of the membership or leadership?
- Are there substantial, and perhaps unquantifiable, risks facing one organization?
- Where is opposition likely to emerge and can the opposition be turned around or neutralized?
- Are there obvious deal-breakers on either side?
For the answers to these questions and discussion of more questions, go to www.AssociationTRENDS.com.