1.
© 2020© 2020
Road to Merger
Success for Nonprofits ™

2.
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Introduction
www.nielsenconsults.com

3.
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OUR ROADMAP
● Spectrum of possibilities
● Legal considerations and due diligence
● Steps in the merger process
● Assessing potential partners and
negotiation of essential agreements

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Nonprofit Landscape Today….

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Impact By Numbers - April 2020
● 91% curtailed or adapted services
● 18% of staff, on average, furloughed/laid off
● 90% of orgs experienced revenue loss
● 44% anticipate further staff cuts
● 55% anticipate further service cuts
Source: LaPiana & Associates

6.
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Sustained Collaboration
● A strategy to achieve a mission or objective,
not an end in itself.

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Collaboration Alliance Integrated
Organization
● Coalition ● Shared space ● Joint venture
● Movement ● Fiscal
sponsorship
● Parent -
subsidiary
● Collective
impact
● Joint
programming
● Asset transfer
● Joint Advocacy ● Admin support ● Merger

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Merger Structures
● Statutory Merger
● Transfer of Assets
● Liquidating Transfer of Assets
● Consolidation
● Parent-Subsidiary Relationship

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Merger “Typical” Characteristics
● “Surviving organization” and “disappearing
organization”
● Surviving organization inherits all assets,
liabilities, and obligations
● Product of extensive negotiation
● Due diligence vital

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Common Nonprofit Merger Scenarios
● Financial crisis or feared crisis
● Organizations in competition
● Departure of a key leader
● Growth strategy
● Combining affiliates
● Struggle to recruit/retain Board and staff
● Funder suggestion

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Understand Your Ecosystem

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Common Benefits Sought
● Program preservation
● Heightened impact
● Reduced admin costs
● Stronger strategic positioning
● Stronger Board and staff
Source: CompassPoint

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Conditions for Success
● The Bridgespan Group studied nonprofit mergers in 4
U.S. states over 11-year period. Organizations most
likely to benefit are those that:
○ Compete with other nonprofits to offer similar services in the
same community
○ Are "asset intensive" — dependent on skilled employees and
ownership of large facilities (such as schools)
○ Are bound by regulations that dictate how services are
reimbursed, staff members are certified and facilities are licensed
Source: Bridgespan

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Merger Myths
● Mergers save money
● There are too many nonprofits
● “Merger of equals”
● The all-encompassing merger agreement
● The whole is greater than sum of its parts
Source: CompassPoint

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Merger Costs
● Opportunity cost
● Infrastructure needs
● Heightened salary
Source: CompassPoint

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#DidYouKnow
● According to Harvard Business Review, 70%
of corporate mergers fail due to some
combination of culture, ambition, and
strategy getting misaligned.

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Lanes of Success
● Board members
● CEOs
● Funders

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Merger Process
● The opening of the door…
● Digging around
● Negotiating the agreement
● Legal recognition
● “Go!”
● Integration and evaluation

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1. Opening the Door
● Past collaborative experiences
● Board-CEO relationship
● One voice
● Current condition
● Risk tolerance
● Time

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Identifying Partners
● Past and present partners
● Complementary programs/services
● Geographically desirable
● Successful mergers move at the speed of
trust

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2. Digging Around
● Formation of a merger committee
● Confidentiality agreement
● Exchange of information
● Considerations of culture and change
● Intent-to-merge resolution

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There is Value in Exploration...
● Self awareness
● Unearthing other partnership opportunities
● Team growth

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Due Diligence
● Governance and values
● Licenses and accredidation
● Tax
● Real/Physical/Intellectual Property
● Financials
● Contracts
● HR
● Risk

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5 Key Questions to Answer
● Will merger result in better quality, greater
efficiency, or more comprehensive service?
● How do 2 orgs complement one another?
● How are philosophies and cultures
similar/different?
● Will merged org be more sustainable?
● What does cost structure look like short and long
term?

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Visible vs. Invisible in Due Diligence
Visible
● Systems
● Technology
● Policies/procedures
● Programs
● Resources
Invisible
● Leadership style
● Decisionmaking
● Inclusion
● Trust
● Values
● Conflict

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Intent to Merge Resolution
● Promise of good faith
● Ability to inform stakeholders
● Exclusivity in discussions
● Merger fundraising is group effort
● Delegation of authority to merger
committee

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Key Tip!

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3. Negotiating the Agreement
● Timeline
● Mission and Vision
● Board of Directors
● CEO
● Budget
● Name and Location
● Corporate structure
● Programs
Source: CompassPoint

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Legal Review - Issues to Review
● Sufficiency of the agreement
● Collective bargaining
● Antitrust
● Property

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Merger Ratification
● Merger committees make recommendation
to the Board
● Proposed agreement presented
● Merger committees disband
● Boards vote
● “Agreement in principle”

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4. Legal Recognition
● Prepare the documents in accordance with
state law
● Technical merger vs. Statutory merger

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5. “Go” Time
● Execute on the plan
● Intentionally determine publicity level

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6. Integration and Evaluation
● Integration team
● Infrastructure and technology
● Staff processes
● Policies and procedures
● Culture and habits
● Board dynamics

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10 Key Areas of Integration
● Board
● Management
● Finance
● Program
● Staff
● HR
● Fundraising
● Communication
● Technology
● Facilities
Source: LaPiana & Associates

35.
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Organization Culture
● Celebrate old stories and create new
together
● Consistently communicate cultural values
● Discuss traditions
● Define success together
● Establish pit stops and guardrails

36.
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Don’t Ignore the Elephants

37.
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What are Your “EIs?”

38.
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Summary
● Sustained collaboration is a spectrum
● Understand the ecosystem of both orgs
● Avoid the merger myth traps
● 6 step merger process
● The differentiator: organizational culture
● Know your EIs

39.
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THANK YOU!
The information contained in this presentation has been prepared by Gregory Nielsen and is not intended to constitute legal
advice. Gregory Nielsen has used reasonable efforts in collecting, preparing, and providing this information, but does not
guarantee its accuracy, completeness, adequacy, or currency. The publication and distribution of this presentation are not
intended to create, and receipt does not constitute, an attorney-client relationship. Reproduction of this presentation is
expressly prohibited.
Gregory Nielsen
gregory@nielsenconsults.com
www.nielsenconsults.com
Twitter: @gregory_nielsen
Phone: (502) 472-5367