By Katie Smith Milway, Maria Orozco, & Cristina Botero
The recent economic recession triggered consolidation
in a raft of for-profit service industries, from airlines
to financial institutions, as companies sought
to create more cost-efficient operations and broaden
their customer reach. Not so in the nonprofit sector.
Despite a downturn in giving by private donors
and dramatic cuts in government spending, according
to our research the rate of mergers in the nonprofit sector remained
flat.1 (See “Nonprofit Mergers by the Numbers” below.) Meanwhile, the number of US nonprofits actually grew 7 percent
between 2007 and 2011 to 1.58 million, an average of nearly 40
nonprofits per US zip code.2
The reason that nonprofit mergers continue to languish isn’t
that they don’t make sense. Quite the contrary. Nonprofit mergers
and acquisitions are often an effective way to deliver more and
better services at lower cost. Take Arizona’s Children Association
(AzCA), a child and family services agency. This nonprofit has seven
acquisitions under its belt, each cutting costs up to 40 percent and
increasing the number of beneficiaries as much as 100 percent.3 In
the process, AzCA grew revenue threefold, from $12 million in 1998,
before it began its acquisitions, to $36 million in 2012.
Or consider Crittenton Women’s Union, which helps women
and their families move from poverty to economic independence.
The organization is the result of a 2006 merger of two large and
long-established Boston nonprofits serving disadvantaged women.
Says Elisabeth Babcock, president and CEO of Crittenton Women’s
Union, “We took these two platforms and bone structure and put
them together in a way that allowed us to drive ahead new work
and a new agenda. We would have never had the organizational or
financial capacity to do this [without merging].”
Even though the nonprofit merger rate is static, we see evidence
that the sector is taking mergers more seriously than before. Funders
are improving the support they provide for mergers, and more nonprofit
executive teams are considering mergers as a regular step
in strategic planning. Nevertheless, creating a successful merger
remains difficult, even for organizations that have done it before.
NONPROFIT MERGERS BY THE NUMBERS
Despite evidence of increased funder awareness
of and support for the strategic value of
nonprofit mergers and acquisitions, our analysis
of legal merger activity in Arizona, Florida,
Massachusetts, and North Carolina between
2007 and 2012 does not hint at a rise in overall
nonprofit mergers. The Bridgespan Group
performed an analysis on legal merger filings
from 1996 to 2006 and then compared the
later five years, 2001 to 2006, to merger filings
from 2007 to 2012 in the same four states. We
found little change in merger rates.
In Arizona, Massachusetts, and North Carolina
the number of merger filings over the same
time period had increased. But when divided by
the average number of organizations for each
five-year period, cumulative merger rates in
those three states remained unchanged compared
to the previous five years. That’s because
the rate at which new nonprofits were formed
kept pace with the increase in merger activity.
Florida was the only state that experienced
a falloff in the number of legal mergers over
the period and a significant drop in its merger
rate, largely because the number of nonprofits
in the state grew significantly—15,000 new
501(c)(3)s were established in the recent fiveyear
period. The net result was a 30 percent
drop in the cumulative merger rate.
Debra Jacobs and Pam Truitt of the Patterson
Foundation—which facilitates conversations
among organizations considering working
together—hypothesize that the influx of
wealthy people and baby boomers who move
to Florida and want to start socially driven second
careers might be the primary driver of the
proliferation of nonprofits in the state. Such
philanthropy is highly personal, and combining
forces with others can be seen as failure to
launch and grow a philanthropic vision.
We also performed a more detailed analysis
to understand how merger activity differed
by revenue and field. Judging from Massachusetts
data—similar to the findings from
our previous article—legal mergers continue
to be most pervasive and increased significantly
among organizations in the child and
family services field. A second significant
observation from the Massachusetts data
was the emergence of a dominant type of
merger—large nonprofits rolling up smaller
nonprofits. The number of mergers between
large and small nonprofits doubled in the last
years; mergers between larger and medium
nonprofits also increased 1.5 times.
During our research, we interviewed nonprofit merger veterans,
their funders, and intermediaries. We found unanimity around three
emotionally charged issues that can surface after merger talks begin
and derail the effort: creating alignment within the boards, defining
roles for senior staff, and blending the brands. These three traps can
sink discussions between otherwise mission-aligned partners. In
short, there has been some progress in developing a favorable funder
ecosystem, tools, and proactive merger strategy, but nonprofits need
to do a better job navigating the three softer traps if they are going
to turn their increased skill to merge into a will to merge.
Why Mergers Fail
Five years ago, we argued in a Bridgespan report titled “Nonprofit
M&A: More than a Tool for Tough Times” that mergers hold far
more potential to create value in the nonprofit sector than most
people realize.4 But at least four barriers were preventing that potential
from being achieved:
A lack of knowledge about when and how to think about mergers
and acquisitions.
A dearth of funding for due diligence and post-merger
integration.
A lack of matchmakers to create an efficient “organizational
marketplace” through which nonprofits could explore potential
merger options.
A tendency to look at mergers reactively, as a route out of
financial distress or leadership vacuums instead of proactively
as an effective growth strategy.
Since then we have seen at least modest progress on all four issues.
Important new resources have become available that provide
information on the hows and whys of mergers. One of these is the
Nonprofit Collaboration Database, an expanding resource housed with
the Foundation Center website, which provides detailed information
on more than 650 collaborations nominated for the Lodestar Foundation
Collaboration Prize and other collaborations self-reported by
participants. Organizations like MAP for Nonprofits and Wilder Research
have invested in reports such as “Success Factors in Nonprofit
Mergers” (2012) and “What Do We Know About Nonprofit Mergers?”
(2011), respectively. And nonprofit merger advisor La Piana has grown
its online collection of tools and publications on nonprofit M&A.5
Although still relatively small, new sources of funding are flowing
for merger due diligence and integration. In the past few years,
Boston, New York, Los Angeles, Charlotte, N.C., and other c ities
have established philanthropic funds that make grants to cover
merger costs or provide technical assistance for potential mergers
or other collaborations. Foundation Center records show that
grants for mergers have increased on average about 18 percent per
year in real terms, to $5.3 million in 2011, up from $1.4 million in
2003.6 The total amount of money dedicated to supporting mergers
remains small, but it is growing. And foundations increasingly embrace
matchmaking, organizing “meet and greets” among grantees
so they can get to know each other and explore synergies.
We’ve also seen evidence that more nonprofits are taking a strategic
and forward-looking view toward mergers. From November
2008 to November 2010 we conducted four surveys with a pool of
800 nonprofit executives; we heard back from 100 or more in each
survey. Consistently, 20 percent of all organizations reported considering
mergers as part of their strategy, and by November 2010, 7
percent had completed acquisitions.7 These acquisitions took place
among nonprofits with revenues less than $5 million or more than
$25 million, numbers that track somewhat with Massachusetts data
from our recent 2007 to 2012 study. Those data showed the largest
increases over the prior five years in mergers involving large organizations
(more than $10 million) and smaller ones (under $3 million).
If the nonprofit sector is making good headway to overcome each
of the four barriers, why aren’t we seeing an increase in merger rates?
One important reason, we found in our research, is that deals that
might have been strategically and financially advantageous turned
sour during negotiations over the highly emotional issues of boards,
senior staff, and brand. “It seems to me that individuals (whether
board or staff) fail to focus on the overall goal of increasing mission
impact and get stuck on safeguarding their own personal or institutional
status,” says Lois Savage, president of Lodestar. “Successful
collaborations are easier when spearheaded by a visionary leader
who ‘gets it’ by understanding that maximizing mission impact often
involves going beyond (and perhaps dissolving) organizational
boundaries.” How can nonprofit leaders come to grips with these
softer, but very real, challenges? Let’s look at each of the three elements
in turn.
Involving the Board
When AzCA’s new CEO, Michael Coughlin, approached his board
of directors about a possible merger, the organization had already
undergone a series of mergers under its long-serving prior CEO Fred
Chaffee. But the deal Coughlin was considering in 2012—a potential
“merger of equals” with Child and Family Resources (CFR)—was
bigger than anything AzCA had yet contemplated.
Ingrid Novodvorsky was on the board at the time and became
AzCA’s chair shortly afterward. “We talked as a board about the
criteria we’d need for a potential partner statewide,” she recalls.
“The one that emerged as the candidate was Child and Family
Resources. We’d partnered with them on grants. We weren’t strangers.
In May our new CEO brought reasons why this was a fit, and
we authorized him to do financial due diligence.” The board hired
a merger consultant to advise on process.
Merger talks proceeded, with an initial focus on alignment of
mission, values, and culture. But then something happened that
broke trust between the board and staff. AzCA and CFR had just
begun to share financial data and prepare a pro forma budget for a
merged organization when several members of AzCA’s senior management
team brought concerns about the viability of the merger
to the board. Given the mixed signals—a CEO who supported the
merger and dissenters on his team who opposed it—the AzCA board
ended the merger talks, and Coughlin subsequently left the agency.
Looking back, Coughlin, now CEO of Tri-County Community
Action Program in New Hampshire, says he learned from the experience.
He faults himself for taking on a big merger too soon into
his AzCA tenure, before he had time to fully earn the trust of his
26-member board and his senior staff (an observation reinforced by
findings of a Catalyst Fund report on the average tenure of merger
leaders).8 This deficiency was exacerbated by the fact that not all the
board members showed up for each meeting. “I should have been in
contact with the whole board much more frequently, and I should
have been there a lot longer before I suggested this,” says Coughlin.
Novodvorsky says that the board’s critical concern was transparency.
Instead of just hearing high-level presentations, the board
needed to get familiar with the details: meeting minutes, balance
sheets, and financial reports. With data, says Novodvorsky, a board
could calibrate concerns from other quarters. “We had a merger
committee, but they didn’t have early access to the data.”
Not all mergers flounder at the board level. An example of successfully
navigating board thickets is the 2006 merger of Crittenton Inc. and The
Women’s Union. Crittenton, founded in 1824 as the Boston Female Moral
Reform Society, was a leading service agency for women and families. The
Women’s Union, founded in 1877 as the Women’s Educational and Industrial
Union, was an advocacy organization conducting programs and research
focusing on the social and economic challenges faced by low-income
women and their families.
Despite the obvious challenge of bringing together two agencies
with strong cultures and more than 300 years of history between
them, there were compelling reasons for a merger. The two agencies
had complementary strengths: Crittenton was stronger in direct services,
whereas The Women’s Union brought expertise in research and
advocacy. Crittenton had sizable assets in the form of Boston-area
real estate, and The Women’s Union had cash. Moreover, both CEOs
were retiring, offering a chance for new leadership of a combined organization.
But, says Babcock, who was hired to oversee the merger
in 2006 and is president and CEO of what is today called Crittenton
Women’s Union (CWU), “the board merger was the hardest part.
We had two organizations with different board cultures and different
perspectives on what was needed in the new organization.”
Babcock and her chairman aligned the merged board to CWU’s
mission through board member turnover and dilution. Each board
chose seven members for the combined CWU board. “I was fortunate
that board leadership didn’t shy away from confronting the tough
issues—for example, individual board members and their roles,” says
Babcock. “We created a shared mission and vision, worked hard on
how the board role should lead and support that vision, and transitioned
off the board members who couldn’t realistically be a part of
the new vision and role of the board.” As of January 2014, six of the
original 14 members were still on the board, along with 12 new members.
“The refreshing of the board is a critical element to creating a
board that partners with your evolving organization,” says Babcock.
CWU continues to look for merger opportunities, but prospects
have been limited. “Since we merged, we have had discussions with
five organizations we would have liked to bring into a partnership, and
they have all walked away,” says Babcock. “In every instance they’ve
said, ‘I don’t think it’s really what we want.’ And in every instance,
their board was the barrier. Someone says, ‘I cannot be the board chair
who presides over the elimination of my organization.’” In Babcock’s
view, the problem is that boards see themselves as “the keepers of the
sacred flame of mission, and the idea of furthering the mission apart
from furthering the organization in its existing structure is very hard
for them. They cannot separate these two to look strategically at how
they might create more mission impact by changing the organization.
They have conflated the mission and the organization.”
KEEPING MERGER TALKS ON TRACK
Getting started | John MacIntosh of New
York Merger, Acquisition, and Collaboration
Fund recommends that “boards could consider
implementing a formal and recurring
practice of revisiting the opportunities for
mergers, partnerships, and other types of
formal, long-term collaboration as a means
to further their organization’s mission at least
once a year. It should be an annual process of
a high-functioning board. Some boards also
have standing merger committees to make it
easier to act quickly if the opportunity arises.”
Even when there’s no partner immediately
in view, keep mergers and other
types of collaboration in mind and review
their potential annually as part of
your strategy.
When a potential combination fits your
strategy, get to know each other—not
just the executive directors, but other
senior staff and crucial board members.
After the getting-to-know-you phase,
start formalizing things. Create a structured
planning process, with explicit roles
for senior staff and the board to ensure
that your due diligence is actually diligent.
This may also mean including your board
chair as the CEO’s thought partner and
principal conduit to the board.
Getting comfortable | Maya Enista, former
CEO of Mobilize.org, a membership organization,
says, “For some members, we framed
the merger in a very personal way, focusing
on benefits to individual students. For others
with a finance background, we emphasized
potential financial benefits.”
Prioritize transparency and ground conversations
in cold, hard facts so the
board and the staff learn together.
Keep a close eye on the financials, asking
questions and sharing the good, the bad,
and the ugly with the board.
Don’t be pushed into hasty action by
a big funder or an artificial deadline. It
takes time to make a good merger, and
time to put the brakes on a bad one before
it’s too late.
Getting past emotional traps | Michael
Coughlin, former CEO of Arizona’s Children
Association, wishes he had pressed his senior
staff harder to understand what doubts
they might have. “If I were to do anything over
again, I would be relentless in going back to
people and asking How do you feel? What’s
bothering you? If you don’t have your senior
management team with you, you are dead
in the water.”
Identify the toughest issues, including
the roles of senior staff and board members,
brand identities, and culture. Don’t
sweep them under the rug, work through
them.
Planning should take into account potential
structures for staff as well as roles
and committees for combined boards.
Get outside help, not just on the financial
questions, but for softer subjects
like organizational structure and branding.
Skilled facilitators can add real value.
Sometimes funders will help pay for this
outside support, even if they don’t have
an explicit merger support program.
Remember that mergers aren’t the only
form of collaboration—joint ventures to share
space, back-office functions, or specialized
programmatic functions can also be a way to
achieve economies of scale without giving up
organizational autonomy or identity.
Integrating Senior Staff
A second emotionally charged hurdle is planning for the future of
the organization’s senior staff. Before Coughlin joined AzCA, he
was CEO of Goodwill Industries of Northern New England, where
he had completed two mergers. One of the reasons that these were
successful is that he found room at Goodwill for the important senior
staff of the acquired organizations. “We added the other CEO
to my senior team, found roles for other members of their team,
and lowered cost through attrition over the years,” says Coughlin.
Novodvorsky, chair of AzCA’s board and a former board member of
one of the organizations AzCA acquired, says that most staff in the
acquired organization were given roles at AzCA following the merger.
It’s important to note that these were essentially acquisitions by
large organizations of smaller ones that eventually became separate
programs or business units within the larger acquirer. The objective
was program and revenue growth. The smaller acquisitions brought
new expertise, clients, and potential access to funding, fueling the
acquirer’s growth. This made it easier to find roles for senior staff.
Following the merger of the $40 million Goodwill chapter with
Training Resource Center, a $4 million workforce development
nonprofit, “We became able to compete for contracts that neither
one of us could before, and the combined organization grew to $60
million,” says Coughlin.
In contrast, when two organizations that are close in size merge,
it is often to gain economies of scale. Such mergers inevitably make
some roles redundant, and it is harder to find roles for all senior staff.
Indeed, one of the most important questions that nonprofit leaders
face in planning a merger—especially a merger of equals—is that of
their own futures. In the nonprofit sector, executives rarely enjoy
golden parachutes, and they have no stock options to cash in for a
healthy post-merger profit. Unless senior staff want to retire, plan
to move on, or are amenable to a subordinate position in the merged
organization, the risk to their own future can kill merger talks.
Consider the 2010 merger of equals of Mobilize.org and Generation
Engage, two small national organizations working to mobilize
Millennials. Generation Engage had a staff of six and a $700,000
budget; Mobilize.org had three staffers and a $500,000 budget.
Generation Engage leader Decker Ngongang and Mobilize.org leader
Maya Enista knew each other before they began discussing a merger.
“We both went to the same conferences and were always the youngest
people there,” says Ngongang. “We ended up working together
on a couple of campaigns. The level of engagement increased between
our organizations and constituents to where it made sense
to stop competing for funders. We started talking, and going out
to coffee, and discussing how we could partner even more deeply.”
“Decker and I really liked each other,” says Enista. “Most important,
neither of us was a founder. We were able to approach this
with distance about what’s best.” Adds Ngongang, “We sat down,
mapped it out. We brainstormed on how we would talk to our respective
boards and funders, what were the politics that needed to
happen, questions the board would ask.”
Though Generation Engage was slightly larger, Mobilize.org
ended up as the acquiring organization. Ngongang was amenable to
a subordinate position. Enista stayed on as the head of the merged
organization and Ngongang became vice president of programs.
“It was not even a question about my becoming a co-leader,” says
Ngongang. “I thought it was crucial to focus on the work instead of
who is the most important.” Three years later, although both have
moved to new roles in other organizations, Enista and Ngongang say
the merger is a success. “We did a survey of our membership,” says
Enista. “No one saw any change or disruption. Our budget doubled,
our staff tripled. We were able to extend our reach.”
These two young leaders agreed to work together in the newly
merged organization, but for many nonprofits one of the rationales
for a merger is that at least one merging organization’s
leader is ready to leave. MAP
for Nonprofits, in its 2012 study of 41 Minnesota
nonprofit mergers, reported, “For 80
percent of the mergers, an executive director
had recently left or was soon to retire in at
least one of the pre-merger organizations.”9
Whether a merger results in reassigning
roles, creating graceful exits, or developing
new leadership positions in the merged entity,
crafting a plan for senior staff that the
staff itself considers fair and in the organization’s
best interests is a critical step if the
parties are to actually tie the knot.
Stewarding the Brands
A final obstacle that can derail merger deliberations,
even when all else is aligned,
is brand stewardship. In the case of corporate
mergers, especially those that serve
consumers, the advantage of preserving
a strong brand identity is obvious: strong
brands beget customer loyalty. When snack
and cereal maker Kellogg acquired biscuit
company Keebler, for example, however
sweeping the back-office changes, the company
hung onto Keebler’s trademark elves.
For nonprofits, brand is often important
as well. It may count with funders, elicit
trust from clients, and attract volunteers,
board members, and talented staff. Brand
can also be about how an organization sees
itself—and integral to a nonprofit’s culture.
Because of this, brand can be a lightning
rod during a merger. There are three ways
to ground the emotional charge. One is for the acquiring organization
to retain the brands of the acquired organization, as PepsiCo
did when it acquired Frito-Lay, Pizza Hut, and KFC. The other is to
merge the acquired brands into the existing one, as Cisco Systems
did with the networking companies it has acquired. A third approach
is to merge under a new, often amalgamated, name, like Citigroup,
the entity formed from the merger of Citibank and Traveler’s Group.
Take, for example, New York’s Hillside Family of Agencies, which
grew the reach of its mission to help at-risk youth through nine
strategic mergers. Hillside has taken the PepsiCo route, turning
acquisitions into business units that bear the name of the former
nonprofit, such as Crestwood Children’s Center, Snell Farm Children’s
Center, and Hillside Children’s Center. In Boston, two wellestablished
nonprofits chose a similar approach. The Philanthropic
Initiative (TPI), founded in 1989, is a nonprofit advisory team that
designs, carries out, and evaluates philanthropic programs for individual
donors, families, foundations, and corporations. In late 2011,
TPI merged with the Boston Foundation, one of the oldest and largest
community foundations in the country.
After the merger, which fully combined both assets and income,
the two agencies nevertheless remain distinct brands. Though now
a unit of the Boston Foundation, TPI has its own logo, website, and
distinct array of services. “TPI is a national, philanthropic, consulting
firm, and the Boston Foundation is local,” says Kate Guedj, the
Boston Foundation vice president who oversaw the merger. “In the
local market, we use the two brands together, but nationally TPI is
more prominent, with clients all over the country and the world.”
CWU, on the other hand, took the Citigroup route—blending the
people and programs from each merging entity under a new corporate
name, an amalgam of two merging brands. “It’s a mouthful,”
said CEO Babcock, “But when our market researchers tested the
original names of each organization with the public, they both had
distinct and important followings, so we wanted to preserve them.”
In short, brand matters, and crafting a plan that preserves the
equity of any merger candidate’s brand can circumvent a stumbling
block to completing the deal. Most often nonprofits preserve brand
equity through maintaining both names in some recognizable form,
whether as combinations like “Crittenton Women’s” or sub-brands
like TRC at Goodwill of Northern New England. In some cases, such
as Mobilize.org, it’s possible to consolidate under one brand and bring
constituents along, but it takes humility and deep investment in communication
before, during, and after absorbing one brand into another.
A Growing Role for Funders
When successful, a merger can help expand a nonprofit’s programs,
capabilities, reach, and revenue. It can improve the organization’s
cost structure, benefiting the people and communities it serves.
That’s why it’s vital that funders continue to invest in supporting
mergers and learn to navigate all the obstacles along the way—including
the softer traps.
To this end, funders have several critical responsibilities. These
continue to include capturing, codifying and sharing know-how on
all forms of alliances, connecting grantees that could become more
than the sum of their parts, and providing financial support for the
due diligence and integration costs that must accompany a merger.
But their duties should also include serving as trusted advisors and
thought partners to confront the three emotionally charged traps.
At the same time, funders need to be careful to strengthen an
ecosystem that enables collaboration that can lead to mergers, rather
than forcing deals. “Everybody has learned that if you try to force
a shotgun marriage it comes back to haunt you,” says Savage. “A
merger has to be developed on trust. The best thing a funder can do
is create an environment where organizations can get to know each
other and develop this trust.”
Consider Boston’s Catalyst Fund for Nonprofits, a partnership
of four major Boston-area funders and the Kresge Foundation, created
to support local mergers and collaborations. Over the past two
years the Catalyst Fund has given out 25 awards. These allowed
organizations to hire consultant experts for feasibility planning,
assessment, and implementation for collaborations, including mergers.10 By late 2013, the Catalyst Fund had supported 12 prospective
mergers, eight of which have been implemented. Offering a range
of support to potential collaborators “allows it to happen more on
the nonprofit’s terms, which leads to a higher likelihood of success,”
says Peter Kramer, manager of the Catalyst Fund.
In its 2013 Interim Report, the Catalyst Fund notes that much of its
early success “can be attributed to its ability to provide a flexible model
in which nonprofits can chart
their own course with the freedom
to choose their own consultants
and timetable…. Nonprofit
partners have not become overwhelmed
with final outcomes
from the start but rather challenged
to initiate the difficult discussions and work that lead to true
partnerships.” The Catalyst Fund intentionally avoids pushing a
merger match. “There is a power dynamic you need to be very careful
about,” explains Guedj of TBF. “We have seen funders trying to
force mergers … and it will work for a couple of years but fall apart.”
(See “The Collaboration Alternative,” below.)
THE COLLABORATION ALTERNATIVE
Although our research focused on mergers and
acquisitions, it’s clear that the majority of nonprofit
organizations are collaborating frequently
in ways short of legally blending organizations.
Of the 102 nonprofit leaders who responded to
the Bridgespan Group’s November 2010 survey
on approaches to managing through the
recession, 81 percent said they were engaged
in some form of collaboration, a jump of 20
percentage points from answers to the same
question in 2009. Says David La Piana, founder
of La Piana Consulting, which advises mergers
and collaborations, “While the energy is always
around talking about mergers, the frequency is
in every other kind of collaboration.”
Short of an actual merger, nonprofits can
use a range of alternatives to align with others
and achieve greater impact.
Best practice sharing: Advances sector
knowledge by promoting innovative
approaches and sharing lessons learned
(Lodestar Foundation Collaboration
Prize).
Coalition: Aligns a group of like-minded
organizations around a common, agreed
upon goal (Green Economy Coalition)
Formal partnership: Allows two or more
organizations to be committed to shared
goals without integrating organizational
functions (Hillside affiliates).
Joint venture: Integrates partnership
of two or more organizations in a new
legal entity, owned by the partners
(Career Family Opportunity Cambridge,
a venture of Crittenton Women’s Union
and Cambridge Housing Authority).
Sharing services: Enhances economies
of scale, generally for cost savings, revenue
sharing, or service enhancement
(AA RP and Experience Corps, which
share office space, member outreach,
and cobranding).
Each alternative carries tradeoffs in autonomy,
risk, and investment required. For
example, coalitions can spend vast amounts
of energy just keeping members aligned, and
they can be slow to achieve deep, meaningful
impact. Partnerships can be strengthened
through formal memos of understanding and
processes, but without integration, there is
no guarantee the relationship will continue.
Shared services are likely to require significant
legal and operational alignment, meaning
cost, revenue, and other benefits may not
materialize in the short term.
When planning collaborations, organizations
need to consider the pros and cons of
each structure. Ultimately, the right approach
depends on the goals of the collaboration and
the parties involved.
Another model of funder support for mergers and collaborations is
the Patterson Foundation. “We rarely ever use the merger word,” says
Patterson’s president and CEO Debra Jacobs. “It scares people away.
Mergers are often not the answer to the question.” What the foundation
does offer is skilled third-party facilitation, when the time is right.
“We let relationships bubble up, encourage organizations to sit down
with others and talk,” says Jacobs. “They’re not ready for a facilitator
if they just met for coffee once. They need to build trust first.”
And when the time comes to talk merger, The Patterson Foundation
has clear-cut ground rules for its involvement. Says Jacobs, “It can’t
just be two EDs, or two board members. If they’re going to enter into
merger exploration, we require that their boards approve a resolution.”
The Catalyst Fund and the Patterson Foundation are part of an
increasingly supportive ecosystem for nonprofit mergers and other
forms of collaboration. They can play a role in overcoming the hard
barriers that limit merger skill. But they can also address the softer
traps around will to merge, by serving as trusted advisors on board
governance, senior staff role definition, and brand stewardship.