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The movement toward consolidation where there are multiple associations in a field accelerated in 2011. The relentless recessionary economy persists; pressures remain on nonprofits’ costs; advertising, sponsorship and exhibit revenue often remains flat; constituents increasingly want to deal with fewer organizations in each field. There is no official national reporting on association mergers; each participant files merger documents in its own state of incorporation. But blogging entries and other communications among association executives suggest that more and more associations are consolidating. What are some trends?
• Supplier-driven mergers. The impetus to merge can come from many sources – the retirement of one group’s CEO, a declining financial trend, economies of scale to fund new services, etc. But the most common prod comes from suppliers. They purchase advertising, sponsorships, and exhibit booths; together these can be an organization’s single largest revenue source. Suppliers understandably prefer to spend their limited marketing funds at one primary association in the field.
• Digital due diligence. In any merger each prospective partner takes a detailed look at the financial and legal condition of the other. “Due diligence” is essential because the governing board members risk personal liability if they approve such a major transaction without closely examining the ramifications. Today, rather than exchanging truckloads of documents, it is simpler to scan and post the requested materials on a secure extranet site. Scanning is equivalent to copying. But there are no paper documents; anyone closely involved can be given access; and, if the merger does not close, it’s easy to “destroy” the documents with a few keystrokes.
• Member voting efficiencies. If an association has voting members, in most states there must be a meeting of those members to approve the merger. But usually members can vote by proxy instead of in person. So the most efficient way to achieve member approval of an association merger is usually through a “phantom” meeting where members are asked to submit their proxy votes, pro or con, rather than to actually attend the meeting. Check the organization’s articles of incorporation, bylaws and applicable state law before attempting this.
• Consultants/facilitators. In any association merger, especially during the early stages of conceptualizing, it is hard for “insiders,” whether volunteer or staff leadership, to be entirely objective. Prospective merging associations often engage a consultant/facilitator to help walk through the ramifications, keep the discussions focused on “the prize” of an eventual closing, and deal diplomatically and objectively with touchy issues such as surviving staff, headquarters offices, organizational name, etc. A good consultant/facilitator can make the difference between a failed association merger and a successful one.
Jacobs is head of the Nonprofit Organizations Team at the Pillsbury law firm's D.C. office. He is general counsel for ASAE and the author of several books on association law, including the new 2011 The Legal Guide to Nonprofit Mergers and Joint Ventures published by ASAE.