2018 Fall issue of Horizons

and have an increased impact in the communities served.

altering benefits for a specified period or opening all positions up to interview would be beneficial to the merging entities. Donors need to be kept informed, and their concerns addressed, in order to keep funding sources stable during the integration. Liabilities, commitments and contingencies must be carefully and openly addressed. A thorough due diligence effort and transparent communication will ensure that the combined organization is structured appropriately. In addition, the organizations should consider whether insurance can offer any protection from legacy issues. Getting Started with the Process Once a NFP has decided that a merger or acquisition is the right solution to keep its programs and missions viable, navigating the M&A process can be daunting. Accepting that each M&A transaction is unique, the following steps will help your organization navigate the process. Identify Potential M&A Partners An organization can identify potential partners through several means, including seeking out organizations that:

The study also reported that:

∙ In 80% of NFP mergers, a prior collaboration existed between the organizations ∙ In 60% of cases, the acquired organization initiated the merger discussion ∙ In 85% of cases, the NFP board members emerged as chief advocates during the merger process Careful due diligence that focuses on, first and foremost, the “fit” before financial benefits will increase the likelihood of a successful business combination. Get Buy-In Successful business combinations cannot happen in a vacuum or occur overnight. It takes a significant amount of time, resources and energy to learn about another organization and evaluate if its goals, mission and culture alignment with yours. Leadership must pay particular attention to cultural alignment before a merger or acquisition occurs and during the integration The more each organization is transparent with its expectation on leadership representation from each of the combining organizations, the better the combined entity can develop strategies to assuage concerns. For example, a board may decide to stagger board terms, seek leadership outside of the combining organizations, or create a special committee to help address challenges as they arise. Staff involvement is critical to success. If your staff does not see the benefits of the restructuring, it will be difficult to realize any efficiencies. Clear communication and an open dialogue will help keep staff turnover at reasonable levels. In addition, consider whether measures such as retention bonuses, not process. Succession and leadership challenges will undoubtedly arise.

∙ Currently provide complementary or competing services to the same population

∙ Compete for the same funding base

∙ Share a similar mission

Once a potential partner is identified, the executive director, board chair or a person with key interests in both organizations will begin the process of evaluating the merits of going forward with more formal M&A steps. This first stage of the M&A process can take time and have many “false starts” or this stage can happen very quickly.

30 Not-For-Profits Can Create Value though Strategic Restructuring