How Mergers and Asset Transfers Promote Sustained Collaboration Between Nonprofit Leaders

Collaboration can be a powerful tool for effecting meaningful change in nonprofit organizations. However, social impact leaders have become fatigued with mandates and incentives to collaborate without a clear purpose. After all, many joint ventures are unsuccessful, posing risks of resource waste and inefficiency while potentially eroding stakeholder trust and commitment.

In hopes of changing this negative perception, the Sustained Collaboration Network (SCN) was launched in 2017 by nonprofit funders and intermediaries dedicated to making nonprofits more efficient, effective, and sustainable through sustained collaboration. The SCN’s newly published report, Unlocking the Power of Sustained Collaboration: Insights from Partnerships for Nonprofits and Consultants, details key lessons that social impact leaders can learn regarding effective cooperation strategies. The research describes three types of sustained collaboration, drawing from real-world examples of how joint endeavors between nonprofits with documented positive outcomes differ from those without them.

In this blog, we will focus on the first sustained collaboration model: integrated organizations, which involves merging all or part of two or more organizations. We will illustrate how statutory mergers and asset transfers (types of integrated organizations) can serve as great collaborative tools to help nonprofit leaders achieve significant social impact goals.

Integrated Organization : Statutory Merger

A statutory merger occurs when the acquiring organization takes over the assets of the acquired organization, resulting in a single, combined entity. Mergers can occur between two or more parties, but they generally require all participating institutions to have similar goals, values, and visions. Social impact leaders might consider merging their nonprofits for various reasons, such as aligning programs more closely with community needs or pooling resources to enhance operational efficiency. However, this type of integration requires rigorous due diligence “to make sure that the merger partner or affiliate is healthy, reputable, and has no significant or contingent liabilities.”

Case Study: Rebuilding Exchange

Evanston Rebuilding Warehouse and the Chicago Rebuilding Exchange were medium-sized nonprofits that operate at the nexus of environmental sustainability and workforce development, serving two distinct but nearby communities. In 2019, they began considering a potential merger, supported by an exploratory and implementation grant from the Mission Sustainability Initiative. After short-term business closures due to the COVID-19 pandemic, at the end of 2020, each board created integration plans that would later be combined to operate the merged organization. On March 1, 2021, the merger was finalized, leading to the establishment of The Rebuilding Exchange.

Aina Gutierrez, the organization’s Executive Director, found it vital to foster co-ownership in putting together the new Rebuilding Exchange, which she did by taking people’s vote before making important decisions like name and logo. She also worked with the board to evaluate each program based on its overarching mission and financial viability, leading to the discontinuance of one out of five programs.

Over time, the merger proved to be very successful, particularly in financial terms. In 2020, the Evanston Rebuilding Warehouse and the Chicago Rebuilding Exchange had expenses of $1.1 million and $815,000, respectively. After the merger in 2021, the newly created organization had a budget of $2.25 million, which grew to almost $3 million in 2023. 

However, one of the biggest accomplishments of the merger was the expansion of the workforce development program. Six months after merging, The Rebuilding Exchange applied for relevant grants and received two state contracts – something neither individual organization had been able to do before. Thanks to this funding, their workforce development program went from serving 36 people to over 100 people, with the addition of a pre-apprenticeship initiative. With their combined scale and staffing, the merged entity can now access state-level funding opportunities and provide higher-quality services to the community. 

Integrated Organization : Asset Transfer

An asset transfer is a type of integration in which a part or whole of one organization is donated to another. With nonprofits, this typically happens when one entity wishes to divest itself of certain programs that are no longer aligned with its strategic objectives, and another entity is willing to accept and utilize these assets to further its own mission and goals. The scope of an asset transfer is much narrower than a merger. However, social impact leaders still need to consider factors such as legal implications, financial arrangements, and organizational compatibility to ensure a smooth and mutually beneficial transfer process.

Case Study: Asian Youth Center

The Asian Youth Center (AYC) began as a juvenile justice-focused organization, working with law enforcement to conduct gang-related interventions in Southern California. However, recognizing that the funding landscape was changing, as were practices of helping at-risk youth, the agency wanted to move toward a more holistic support model emphasizing advocacy and empowerment. Consequently, AYC conducted an asset transfer, acquiring the Youth and Parent Leadership (YPL) program from Asian Americans Advancing Justice. The program’s focus was using art in schools to encourage students to tell their stories, which the AYC believed could be a vehicle for restorative and transformational justice. 

According to Michelle Freridge, Executive Director of the AYC, the integration of the new initiative brought immense changes to the organizational culture. They invested in cross-training so that empowerment values would be spread throughout the agency, including staff members, YPL participants, and other affiliated youth. Besides, the leadership board adjusted their strategic plan for the AYC, even updating its mission and vision, to reflect their commitment to rebuilding a diversion and advocacy-focused organization. 

Thanks to the YPL initiative, the AYC also grew significantly in funding, recording $2.2 million in grants and contributions in 2019 and projecting $6 million for 2023. One year after the transfer, AYC already secured a $1 million grant to support the program, which went from serving a couple hundred families in 2019 to almost 2,000 in 2022 and expanding from 4 to 12 schools.

Case Study: Share Food Program

The Share Food Program (Share) is a social service organization focused on addressing food insecurity in the greater Philadelphia region. Despite having several successful initiatives already in effect, Share is constantly seeking innovative and efficient approaches to fulfill its mission. Therefore, when approached by Uplift Solutions to take over the Philly Food Rescue (PFR) program, Share embraced the opportunity to enter the food rescue space, gaining greater flexibility in food acquisition and distribution. An asset transfer was conducted for this program, which gathers fresh, surplus food from restaurants and grocery stores and distributes it to food-insecure individuals and nonprofit partners. 

Under Share’s leadership, the PFR initiative grew significantly: before COVID-19, volunteers rescued about 45,000 lbs. of food a month but in 2023, this number has increased to 110,000 lbs. With support from existing PFR sponsors, more people could get access to food, including those who were undocumented and unwilling to sign a form to get food. 

As a result of the asset transfer, Share also formed relationships with partners that would not have been available to them otherwise. For example, organizations that want to implement food rescue can test their reliability and responsiveness through the PFR program, which they can then use to dispense USDA food if successful. In addition, part of acquiring PFR was a technology licensing arrangement with 412 Food Rescue, which enabled Share to connect with franchise food providers and expand their service area. 

In conclusion, the three case studies we discussed underscore the transformative potential of mergers and asset transfers in the nonprofit sector. These collaborative strategies offer social impact leaders opportunities to optimize resources, expand services, and achieve greater community change. 

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