Any merger in the nonprofit sector can be a tricky one, each with its own specific considerations. Even with singular features, however, Thomas McLaughlin, director of consulting services, Nonprofit Finance Fund, maintains that every merger has three distinct phases.
Understanding these phases, McLaughlin says, can be very helpful in identifying and tracking costs, even though merger costs will vary greatly by location and circumstance. The three phases are:
- Feasibility determination. The early stages consist of discussion and information sharing. These are usually cost free. Next is a more rigorous look, often referred to as “due diligence.” This is where confusion occurs, because for-profits and nonprofits operate quite differently. McLaughlin says that a better term is “mutual learning.” Leaders must try to learn as much as possible. Costs are usually low, largely for facilitation and supportive research and analysis.
- Implementation planning. The objective here is to make operational the lessons of the feasibility phase. Costs here are higher than in the feasibility phase, but they still tend not to be unmanageable for most organizations. In some cases, legal or financial complications might require special assistance.
- Integration. This is where the biggest expenses almost always will be incurred. Managers will find that most of their revenue sources will change in a fairly predictable way, but abrupt, or discontinuous, change can cause a sharp spike up or down. Discontinuous changes abound in nonprofit mergers.