Rethinking Nonprofit Mergers

An often dreaded word in the nonprofit world is “Merger.”  Nonprofits worry that a merger will require compromises in their mission, job losses, less control and other sacrifices.  Yet many nonprofits are finding their budgets under significant stress both now and as they look ahead to future funding.  Nonprofits are sometimes too willing to cut services before considering greater collaboration or merger with another nonprofit.

Here are potential advantages from more nonprofit collaborations:

  1. Merger is not the only option!  Perhaps one service in particular is under the greatest financial stress – can your nonprofit work with another nonprofit that is also struggling to continue providing that service or a related one?  How might joint collaboration make it feasible to continue giving a quality service together?  Collaboration might bring cost savings to both organizations. Nonprofits may also benefit by sharing administrative and/or other services thereby gaining economies of scale.

  2. Merger may be necessary if the financial stress is too great and a nonprofit is faced with ceasing operations without a merger. Another scenario that may point to a merger is the departure of the Executive Director of an organization.  If a merger is your solution, then, following some basic principles for evaluating and increasing the chance of success for a merger will be key.

  3. A struggling nonprofit should figure out its BATNA (Best Alternative to a Negotiated Agreement) in order to determine its best course of action.  In other words, if a merger with another nonprofit is not the selected option, what is the nonprofit’s Best Alternative?  If the Best Alternative is “going out of existence”, the merger may be much more attractive to your clients, staff and others associated with the nonprofit.

  4. A neutral third-party that has experience in facilitating mergers can help merger discussions progress to consensus.  Funders sometimes will provide support for a neutral party to identify issues that can be discussed more effectively with facilitation.  Neutral facilitators can help keep communications open, put into a “parking lot” issues that are not ready for decision, suggest gathering more information that might influence creation of a consensus, etc.

The Leadership Group has helped nonprofits decide if merger is an appropriate option and has facilitated mergers to successful completion.  If you have questions or want more information, please do not hesitate to contact us.

Take care and be safe,

The Leadership Group LLC