10 Keys To Success For Nonprofit Mergers

Staff and board retention, management succession, and branding of a new organization are among the most critical issues in any nonprofit merger, according to a new study released today.

“Mergers as a Strategy for Success: 2016 Report from the Metropolitan Chicago Nonprofit Merger Research Project” examined key factors that led to successful outcomes in 25 mergers that took place between 2004 and 2014 across subsectors, such as healthcare, human services, adoption, job training, and literacy.

The study, commissioned by Mission+Strategy Consulting with research by the Center for Nonprofit Management at the Kellogg School of Management at Northwestern University, identified 10 keys to merger success:

  • Trust is the glue that holds together all other issues during negotiations;
  • The most successful mergers are mission-driven;
  • All parties are clear about their organization’s overall goals and use the merger as a strategy to achieve them;
  • Participants should make sure to acquire as much information as possible about their potential partner;
  • The CEO is often critical in prompting discussions about a strategy, especially when the CEO position is in transition;
  • Boards and board chairs must be advocates for mergers to succeed;
  • Staff involvement, particularly management, is critical to the success of a merger and post-merger integration;
  • Leaders must pay attention to cultural alignment, pre-merger and in the merger integration process;
  • Most successful mergers rely on outside experts, such as attorneys, accountants, or merger facilitators; and,
  • Participants must do their homework regarding all aspects of the process and become familiar with merger strategy.

Nonprofits and funders should not see mergers as a sign of failure, according to the study, as nonprofit are using mergers as a way to creatively address “financial distress, as well as a long-term strategy to achieve mission goals.” Merging under duress, however, typically does not increase the odds for success, according to the report.

In 88 percent of mergers studied, interviewees from both organizations felt the new, merged organization was better positioned to achieve goals and increase impact. Strategic mergers can stop short of full integrations of both organizations, according to the study. Organizations can achieve their goals by acquiring programs, combining or pooling overlapping programs to increase efficiency.

“Successful mergers can have a major, positive impact on the Chicago metropolitan community by expanding programming reach and efficiency and increasing service,” said Jean Butzen, founder and president of Mission+Strategy Consulting. The study aims to help nonprofits and foundations understand the “effectiveness of a merger strategy to increase mission outcomes,” she said.

The report includes five in-depth merger cases studies: Big Brothers Big Sisters of Metropolitan Chicago and Big Brothers Big Sisters of Lake County; Boundless Readers and Working In The Schools; Chicago Foundation for Women and the Eleanor Foundation; Horizon Hospice & Palliative Care, Midwest Palliative & Hospice Care Center and JourneyCare; and, United Cerebral Palsy of Greater Chicago and Seguin Services.

The lead sponsor of the study was The Polk Bros. Foundation and the fiscal sponsor was the Chicago Foundation for Women.

Access the full report at www.chicagonpmergerstudy.org