E.D. Notes for the Field: When Does it Make Sense to Talk Merger?

This month, La Piana Consulting is focusing on the potential for mergers and other forms of alliance to strengthen nonprofit organizations in a time of uncertainty or outright crisis. As most E.D. Notes readers know, our firm has been the leader in this area since our founding in 1998, constantly evolving and updating our knowledge and processes for the sector. Be sure to look for our upcoming Learning Link, which will contain a wealth of information on this topic — but here I want to tackle a question that may be top of mind: When does it make sense to talk merger?

Let’s start with when it doesn’t make sense:

• When the organization is in such a deep crisis that there is not sufficient time or headspace to consider this complex undertaking. You need time to negotiate the terms of any partnership, gain board approval, and to put together any required legal documents. It can’t happen this week.
• When the organization is experiencing internal disarray that would make it difficult to enter serious discussions with another party.

If your organization fits either of these descriptions, we can help you move through the crisis and perhaps arrive at a place where merger or another way forward is possible.

Now, here are some circumstances where it may be time to talk merger:

• A long-time E.D. is leaving, the organization feels destabilized, and the board is wondering whether it will be able to recruit a suitable replacement given current circumstances.
• The board itself is losing steam, members are leaving or want to leave, and the energy is just not there to keep the organization going.
• A major funding source has been eliminated or curtailed, undermining the current business model, and a new, more promising business model is not achievable on your own.
• Several organizations in your community or field find themselves facing similar or complementary threats.

Once you think merger might be a good way forward, it is important to take the appropriate steps to make your consideration of this major development as efficient and helpful as possible. Ask yourself:

• Can you identify one or more potential partners for a merger?
• What would you be looking for in a merger with any specific partner – new leadership, a more engaged board, access to new funding, a larger organization to spread overhead?
• Is there a synergy between the organizations that can help both? For example, do you offer complementary services or serve contiguous geographies, do you bring complementary skillsets, is one a powerhouse on individual fundraising while the other is great at foundation grants?

Once you’ve decided it is time to talk merger, and you have identified one or more potential partners, it is time for an initial conversation to test the waters. This is a crucial step, and our Mergers Toolkit can help ensure you put your best foot forward. Help is available. While this may be the first time you have embarked on this journey, we have worked with hundreds of organizations, have developed an efficient process for rapid consideration of the possibilities, and can help you get to an answer as quickly as possible while ensuring all relevant issues are uncovered, discussed, and resolved.

The bottom line is this: the time to talk merger is while you still have something to offer. Few organizations are interested in rescuing a failing operation, pouring money into a hole you bring to them, or absorbing another group’s debts. Merger works best when it is approached as an opportunity to strengthen both organizations, when each party sees an upside, and when there is time to put together a terrific agreement that everyone can stand behind.

If it is time to talk merger, we’re the people to talk with.