Finding a for-profit to convert

The idea of a nonprofit organization taking over a for-profit business is a whole different matter, one that would sound impossible or unthinkable.

However, in “Unlikely Takeover: A Third Way to Scale Social Enterprise” that appears in the Fall/Winter 2013 edition of “The Nonprofit Quarterly” Jon Huggett urges abandoning blanket assumptions and considering ways by which converting commercial enterprises to nonprofit operations are not just feasible but also beneficial.

Huggett uses the example of ABC Learning Centers, a business in Australia that went bust, was taken over successfully by a consortium funded by the nonprofit venture philanthropist Social Ventures Australia (SVA). Huggett offers four lessons that were learned and that would benefit anyone contemplating a similar move.

  • Lesson 1: Pick a hard goal to tighten collaboration among nonprofits. Consortium members strove to agree on exactly what they wanted to do for children.
  • Lesson 2: Pick the board to “move and shake” and not to “represent interests.” This board was “bicultural”: comfortable in both the for-profit and nonprofit worlds.
  • Lesson 3: To secure the deal, use the most robust mergers and acquisitions (M&A) skills from business. They used the moral high ground to squeeze rates down.
  • Lesson 4: Manage toward hard goals. Completing the acquisition was a notable accomplishment, but the bigger challenge was the road ahead.