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October 2007, Issue #6
IN THIS ISSUE:
Merger Sticking Points: Key Issues You Need to Address
Why do You Need a Consultant to Help with a Merger?
Merger Truisms: Points to Remember
Welcome to our Fall Newsletter!
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First-Time Survey of Nonprofit Fiscal Managers and Staff
How do we compare? How do similar organizations staff that particular functional area? What is considered best practice? Our clients often ask these kinds of questions. Comparables can be an important information source, and unfortunately not much data is available when it comes to infrastructure and organizations. Fiscal Management Associates is currently conducting a survey which will begin to gather nonprofit financial staffing information. Please participate now, and you may even win a $100 gift certificate...
http://www.zoomerang.com/recipient/survey-intro.zgi?p=WEB226WJ42ALP4
Survey ends October 31st
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We're devoting our entire fall issue to mergers, a burgeoning topic in the nonprofit sector. Almost two years ago, we featured an article entitled, "The Ugly (M)erger Word," at a time when few nonprofits had completed mergers and even fewer firms had any experience. Today the landscape has changed; more organizations are actively considering mergers and see such transactions as real options to expand services or ensure sustainability. Our merger practice has grown, too, prompting us to share some thoughts we hope you find useful. Feel free to send this issue to your friends and colleagues and give us your feedback and suggestions. And be sure to visit our website, www.KrasnePlows.com to read more about our work and its impact.
Merger Sticking Points: Key Issues You Need to Address
The most successful nonprofit merger partners always focus on the impact their combined services have on their clients, and how they can serve their communities better. But just considering mission is not enough. Organizations need to address other critical issues for any combination to work. We have highlighted typical sticking points that can derail a potential merger.
What happens to our executive director after the merger? A board wants to make sure that its CEO is provided for once the agency is merged into its partner, so it is usually a key negotiating item. Whether the executive director decides to stay or leave (and we have seen both options exercised), trustees want assurance that their leader is taken care of respectfully.
What happens to the board? Some boards, or at least individual board members, want to maintain their voice and continue to serve. Questions like: how many seats will the acquiring organization provide for members of the acquiree's board; who fills them; and in what capacity; can become very thorny. Addressed upfront and handled diplomatically, the new board can be stronger than either original board, bringing on needed skills and desired expertise.
What happens to our critical program? The acquiree organization wants assurance that its core, flagship programs will continue. Often these programs are the reason for the merger in the first place, but sometimes boards seek declarations that money-losing programs will be supported long term or that existing service models will be not be altered.
What about the name? Sometimes it is important that an organization's name be preserved - it may be tied to funding, licenses or other critical assets. A program name may have strong brand recognition in the community. But often the decision is not clear cut and when merged, only a single name will live on. Sensitivity to community concerns and organizational culture are critical ingredients in making a thoughtful, constructive choice.
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Why do You Need a Consultant to Help with a Merger?
Often we are asked why do I need you? The executive director will say, "I already have a lawyer and an accountant, and knowledgeable board members." Experience has proven merger consultants can provide real value to any merger transaction. Working with an executive director and key board members, a merger consultant can:
Provide additional resources - consummating a merger, or even exploring the possibility, is like having a second job Supply crucial expertise - doing mergers is our "program expertise" Offer an outside perspective - asking the tough questions, without the ramifications Address the cultural issues - surfacing issues before they become problems, and knowing where to look for them Function as the project manager - developing and managing the work plan for a complex project to its conclusion Coordinate the external consultants - keeping management from being inundated Fill in the gaps - working with all parties as necessary to ensure a successful outcome Be the force of calm, perspective, and reason in a time of change and anxiety
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Merger Truisms: Points to Remember
Every merger is unique; even though the approach is the same, the path and the solutions often differ. We have found some truisms; no matter how long or short, easy or challenging, the merger is:
Mergers always take longer than you expect. Mergers can take years from initial discussions to complete integration. Although we have worked with clients to complete them in 6 months, 18 months is not unusual. Mergers are never simple. A merger is more than combining the programs and staffs of both partners. Board composition and practices are affected; funders have influence; community stakeholders want to have a say; and systems and procedures vary. Expect the unexpected. The due diligence process will uncover all the dirty linen. We have discovered fraud and malfeasance, found the missing mortgage document to obtain clear title to a building, and determined an organization's insolvency, leading to a transfer of government contracts and folding up the nonprofit. Mergers are not for the faint of heart. Everyone is affected, whether staff, management, or board. Mergers are complicated, time-consuming projects that involve change and uncertainty, different cultures and expectations. Upfront planning and clearly articulated goals go a long way in reducing the bumps in the road.
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