Merger Secrets to Success
New research identifies some of the factors that make nonprofit mergers work.
A new report called “Success Factors in Nonprofit Mergers” was published last month by MAP for Nonprofits, a capacity building organization for nonprofits based in Minneapolis, MN. The multi-year study completed by Wilder Research identifies what factors lead to successful nonprofit mergers, and analyzes what happens after a merger is implemented. The study examined 41 mergers between January 1999 and June 2010, and included interviews with 201 individuals—three to eight people per merger, including at least one executive director, board member, and representative from the dissolved nonprofit. It also looked at financial data obtained from publicly available 990 tax returns and accessed through Guidestar.
The researchers were able to identify a variety of success indicators for a merger in areas such as outcomes, reasons for merging, merging process, and financial analysis. The study was launched at a very informative conference in Minneapolis last month called New Structures for New Times, underwritten by the Greater Twin Cities United Way, which has played a significant role in local strategic restructuring efforts. Here are just a few of the interesting highlights:
- Ninety-five percent of respondents believed that the merger would not have happened if one of the executive directors had not driven it. Also, in 80 percent of the mergers, the executive director of one of the pre-merger organizations had recently left or was soon to retire.
- When the board of each pre-merger organization was very involved in the merger process, respondents were more likely to report that the merged entity had a positive image, reputation, or public support three years following the merger.
- Mergers may work best when the nonprofits have a history of partnering together and openness, and when there is transparency in both legal and financial matters.
- Merger success is associated with how well non-administrative staff members are informed about the progress of the merger and the involvement of non-administrative staff members in the planning and implementation of the merger.
The study supports many best practices for facilitating a merger well. It also confirms that organizations feel they should use consultants; 96 percent of respondents said they would involve a consultant in future mergers.
There is much more information in the study than I’ve shared here, and I encourage you to either read the full study or the shorter synopsis, particularly if you are considering doing a merger yourself. I am grateful to MAP for Nonprofits, Wilder Research, the Greater Twin Cities United Way, and their partners for making this research possible and for sharing it with the entire nonprofit sector. I also wish to acknowledge my good friend and mentor, Ron Reed, who was integral to making the study possible. Ron helped launch Project Re-Design, the mergers and collaborations practice at MAP for Nonprofits, and co-wrote “MergeMinnesota,” a merger how-to manual that is available for free on-line, a really great resource.