It’s a New Day for Mergers (and Non-Merger Mergers)
As we approach the fourth anniversary of the beginning of the Covid pandemic we are thinking about how our practice and the nonprofit landscape have changed. Our work with nonprofits on mergers and other alliances, partnerships, and collaborations (often referred to as “non-merger merger” work) has shifted in remarkable ways.
At the beginning of the pandemic the conventional wisdom was that it would be a “mass extinction event” for nonprofits and we anticipated a rush of merger work. We know now that nonprofits were sustained in large part through public policy interventions such as the Payroll Protection Program and the Employee Retention Tax Credit, and fewer nonprofits pursued formal or intentional collaboration, including mergers, as they focused on retooling for a pivot to remote operations , staying healthy, and retaining staff. In fact, nonprofits stepped up to meet community needs in new ways and continued to deliver services without interruption.
However, there is evidence that things are changing and interest in mergers and less-integrative forms of partnership are on the upswing. First, we are learning that not all nonprofits were able to convert infusions of PPP and ERTC funds into long-term sustainability. Many are looking for new strategies. We are seeing this in a surge of projects focused on mergers and sustained collaboration for greater impact.
What has changed since pre-pandemic days?
- Nonprofits are more familiar with mergers & alliances as a concept. Funder collaboratives like the Better Together Fund in North Texas, the Mission Sustainability Initiative of Forefront in Chicago, and the affiliated funds managed by SeaChange Capital Partners in the Northeastern US and nationally have normalized the concept of strategic partnerships, whether mergers, shared service arrangements, or collective impact efforts.
- Result: Familiarity with nonprofit mergers and other collaborations has resulted in many discussions being fast-tracked. More nonprofits are diving into negotiations, looking to make decisions in shorter timeframes. It is reassuring that mergers don’t carry as much of a stigma as they did in the past. And an expedited timeline isn’t necessarily wrong, but it is always important to have a structured process that considers all issues in a sequential way that incorporates appropriate feedback at the right time.
- Nonprofits are giving serious consideration to a range of collaborative solutions. They recognize the importance of building trust and are looking for options that allow them to work with partners in ways that match their needs, and which may not necessitate a fully integrated merger.
- Result: More nonprofits are investing in collaborative programs like the Central Wetlands Reforestation Collective, a group of five nonprofits working together to re-establish a hardwood forest near New Orleans. Candid and the Council on Foundations worked together on an asset transfer to move CF Insights to the Council on Foundations, enabling CF Insights to be better aligned with the work the Council does with community foundations and the tracking of performance data.
Resilient nonprofits are being strategic about how to grow their impact. Mergers (and non-merger options) are part of the toolkit, not something that is considered only as a last resort. They are looking proactively and creatively to collaborative opportunities to generate more robust results, like the Healthy Futures of Texas three-way merger resulting in a statewide organization providing quality sexual health education. They are looking at ways to fundraise together, share back-office operations, and collaborate on programming. Nonprofits are operating from a position of strength and crafting arrangements that are flexible and mutually beneficial.
We will be sharing learnings throughout 2024 on mergers and “non-merger mergers.” We look forward to continuing the conversation with you. Stay tuned for upcoming content on:
- Approaching Potential Partners
- Non-Merger Mergers
- Cultural Integration
- Spin-offs & Sunsets
Yes and yes! Thank you for this. It’s so affirming when a trusted source like La Piana validates what I’ve been experiencing with clients in the collaboration space. I love the shifting tides of how this field is evolving – and very much appreciate you sharing this – it’s very timely!