It May be Time for Non-Profits to Consider a Merger

It May be Time for Non-Profits to Consider a Merger  
A Possible Solution During Impossible Times  

Mindy Barker | Barker Associates

The profound effects of the COVID-19 pandemic will be felt for years to come in all aspects of our lives and businesses. However, non-profit organizations have faced, and will continue to face, their own set of unique challenges. Overall closures, increasing unemployment, a lack of feasible projects, and the cancellation of fundraising events have combined to result in sizeable shortfalls with regard to funding. 

To navigate through these trying times and ensure success moving forward, non-profits need effective solutions. One possible solution they may consider in 2021 is a merger with another non-profit. And the time to consider this course of action is now – prior to it being needed. Too often, there is an inclination to only consider mergers reactively because, for example, the organization needs financial help. However, the best time to consider it is proactively, as an effective growth strategy. When considered proactively, the advantages and disadvantages can be examined on a more rational, analytical basis instead of an emotional, biased one. 

As with any transition, challenges will be present. Questions to explore may include: 

  • Do you have enough knowledge about mergers and the due diligence required to effectuate one?  
  • Is there enough funding for the process?  
  • Do you know a facilitator to help explore merger options?  
  • Does either non-profit have government contracts in their name for a specified amount of time? 
  • Do you have too much of a personal connection to the non-profit mission and vision to examine the option clearly? 
  • Do you perceive a merger being a failure? 
  • Are you concerned about losing employees? Or the organization’s culture? 

There is no doubt that these are valid questions and considerations that must be examined. Yet, they should not undermine the significant advantages of mergers for both organizations involved, including: 

  • Increased resources – Instead of purchasing new equipment, leasing new space, or hiring new employees, a non-profit can gain all the resources needed through a merger. 
  • Decreased expenses – Each organization has its own expenses, many of which will be duplicative. Once merged, those expenses will decrease. 
  • The ability of each to meet the needs of the other – Each organization has its own strengths that will often compensate for the other’s weaknesses. 
  • Effective growth strategy – Combined resources coupled with decreased expenses will result in an increased probability of growth. 
  • Furthering mission – Oftentimes, with a merger, the reach of the non-profit will expand due to the increased resources, enabling its mission to have a more significant effect. 
  • Better positioned to achieve goals – With more resources and further reach, the organization will have the ability to focus on, and work toward, reaching its goals.  
  • Greater probability of long-term sustainability – With a more effective growth strategy, there will be a higher chance of long-term sustainability and success.

After thoroughly examining the challenges and the advantages of a merger, the following questions should be considered:  

1. Can you look at a similar organization as a resource, and not as competition?  

2. Can you determine the ways in which you are similar and the ways in which you are different? 

3. Can you envision what working together would look like? 

4. Could combining resources, leadership, and operations work in both your favors? 

5. Which name should survive (considering government contracts, if applicable)? 

6. Are you prepared for extensive due diligence? 

Mergers are viable solutions for non-profits, whether due to funding needs or the desire for an effective growth strategy. In either case, through a merger, the strengths of each can be leveraged for a common goal. Over the next several weeks, we will explore a variety of topics related to non-profit mergers, including due diligence, closing items, and integration considerations.  

Barker Associates has extensive experience working with non-profit organizations as they prepare for, and go through, a merger. If you are considering this strategy, use this link to my calendar to choose the best time for a free 30-minute consultation.

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