By NNSI Editorial Team
Nonprofit mergers are often presented as a last-ditch attempt to save organizations that would otherwise be forced to close. A new study on nonprofit mergers instead explores the possibility of mergers as a nonprofit strategy to achieve the mission and increase outcomes.
NNSI researchers Kate Cooper and Rey Maktoufi worked with Professor Don Haider of the Kellogg School of Management at Northwestern University to conduct the study. The research team interviewed more than 100 executive directors and board members who had participated in nonprofit mergers in the Chicago area between 2004-2014. The report pulls findings from across 25 mergers representing organizations in health and human services, education, advocacy, and management support to suggest implications for nonprofit managers, board members, and funders.
What Are the Main Findings of the Study?
- In 88% of the mergers studied, interviewees from both the acquired and acquiring organizations felt the organization was better positioned to achieve organizational goals and increase impact.
- In 60% of the cases, the acquiring organization had experienced a prior merger.
- In 80% of the cases, a prior relationship or collaboration existed between the organizations that merged.
- In 60% of the cases, the acquired organization initiated the merger discussion.
- In 80% of the cases, the merging parties engaged a third-party consultant or facilitator.
- In 85% of the cases, the board chair or a board member from one of the organizations emerged as the chief merger advocate.
- In 44 % of the cases, donors paid part or most of the merger costs.
The report suggested a number of critical issues that surfaced during the merger process, including finding merger partners, branding of the new organization, and the retention of staff, programs, and board members. Additionally, the report suggested implications for nonprofit executives, board members, funders, and the sector at large. These include the following:
- Board members should look for “trigger events” to explore merger strategies (such as the resignation or retirement of an executive director).
- Nonprofit leaders might seek outside expertise (e.g., consultants or lawyers) to facilitate the merger process.
- Funders should offer more transparency and greater clarity regarding funder policies on mergers and merged organizations.
- Across the sector, better practices for coordinating merger advisors are needed.
See the full report, available for free here: http://www.chicagonpmergerstudy.org/. More coverage of the Metropolitan Chicago Nonprofit Merger research project can be found here:
- Nonprofit Quarterly. (2016, November 16). Merger magic: What makes mergers work in Chicago? https://nonprofitquarterly.org/2016/11/16/merger-magic-makes-mergers-work-chicago/
- The New York Times. (2016, November 4). When should charities throw in together? Retrieved from http://www.nytimes.com/2016/11/05/your-money/when-should-charities-throw-in-together.html?_r=0
- Crain’s Chicago Business. (2016, October 20). Nonprofits missing the boat by not merging. Retrieved from http://www.chicagobusiness.com/article/20161020/NEWS07/161019829/nonprofits-missing-the-boat-by-not-merging%E2%80%8B
References:
Haider, D., Cooper, K., & Maktoufi, R. (2016, October 20). Mergers as a strategy for success: 2016 Report from the Metropolitan Chicago Nonprofit Merger research project. Retrieved from http://www.chicagonpmergerstudy.org/.