Nonprofit mergers – When joining forces is the answer

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Nonprofit mergers – When joining forces is the answerWorking Together

One in 12 respondents to a recent GuideStar Economic Survey said they believed their nonprofit was in danger of closing for financial reasons. If your organization is dealing with a lack of either financial or human resources, you need to start looking for solutions — fast. Joining forces with another nonprofit is one strategy to consider. When researched and executed carefully, a merger can make both organizations stronger.

Have the right reason

The decision to merge isn’t an easy one to make. But if your organization has experienced steady declines in grants and donations, it’s worth considering. Duplication and overlap of services may be another valid reason to merge. Bringing organizations together can be a powerful way to build unity, achieve objectives faster and use funding more efficiently.

You also might consider joining with another nonprofit to gain access to a larger skill set. Perhaps another organization has an outstanding and dedicated staff, while you have excellent fundraising skills. Combining forces may enable you and the other nonprofit to provide better services and maximize capabilities.

Pinpoint your goals, question the timing

If you’re mulling a merger, think about what you really want to achieve. Develop realistic objectives stated in measurable terms, such as striving for a 25% increase in donations or an expansion of services into an adjacent community.

You also need to assess your readiness to be a partner. Assemble a committee of key managers, board members and advisors to discuss the financial, legal, public relations and other implications of a potential merger. Invite critical outside stakeholders, such as major funders and service recipients, to provide input. If you’re going to lose funding because a merged entity would deviate from a major funder’s goals, it’s better to know before you make your decision.

In general, nonprofits are better merger candidates when they have stable management — including a strong relationship between the executive director and the board — and a good handle on their strategic challenges. Nonprofits that are growth-oriented, with a history of successful risk-taking, also may be better candidates.

Identify the hurdles

Naturally, nonprofit mergers involve considerable risk of stakeholder resistance as well as internal hurdles. For example, it may be difficult for two organizations to combine their cultures. Out of habit and expectation, staff may oppose efforts to act as a united organization when it comes to everything from the flexibility of work hours to program procedures. Combining information technology systems can be challenging as well.

Funders, program partners and community leaders also may object. Good communication can help alleviate much — but not all — resistance. Legal obstacles are another possibility. Many states have specific procedures that must be followed, particularly if either of the entities owns real estate, and forms that must be filed when nonprofits merge. Further, you may need to get consent from donors to legally transfer gifts or grants.

Finally, consider just how much time and other resources are needed to merge two entities successfully. Depending on the size and complexity of the organizations, a merger can take as long as two years to complete. The process also will involve additional costs, such as for the services of financial consultants and attorneys.

Plan carefully

Two organizations becoming one clearly face obstacles. But, if going it alone no longer seems doable, combining resources with another nonprofit may be the answer. Just make sure that your organization’s plan to merge is as strong as its desire to succeed. 

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