Non-Profit Merger Process and Timeline

COVID-19 has left many non-profits unsure of their ability to meet their mission, leaving Management and Boards to consider a merger or affiliation.  If your organization is at that point, answer these questions to enhance your likelihood of success.

1.     What do we need from a merger partner? – Capital? Cash flow? Management expertise?  Continued ability to operate?

2.     What do we offer to a merger partner? – Clients?  Cash? Community relationships?

3.     What do we want from this merger? – Soft landing for management team? Retention of staff?

4.     What are we willing to give up? – Control?  Board seats? Name/Identity?

5.     What are our deal breakers? – the non-negotiables that will stop the process

Realistically answering these questions will provide a road map to discussions with a potential partner.   

 Knowing these questions, what is a process and a timeline for a merger/affiliation discussion.  Your team should consist of: Executive Director, Board Chair and CFO and should report to the board exec committee.  Other key management team members can join meetings as needed.  The potential partner should have a similar committee.   Most organizations use a consultant with experience in mergers/affiliations to lead the process and facilitate discussions.  Both organizations should meet separately weekly and as a group every other week. Each group should report to their respective boards at least monthly.  It is imperative to have a confidentiality agreement, including a “no shop” clause – no organization can engage in negotiations with another group while your discussions are ongoing.  

 The process should go no longer than three months and can be accelerated if no roadblocks are present or if circumstances require faster conclusions. Each month is a go/no go decision.   This ensures no time is wasted and consensus is gained quickly. In general, Month 1 answers the questions discussed above.  Month 2 develops operational and financial models.  Month 3 uses the information from the first two months to develop a Memorandum of Understanding.

 Having established your team and identified potential partners, it is time to get started. 

 Month 1 establishes the basis for a merger/affiliation.  Both organizations need to answer the questions posed previously for themselves:

  • What do we need from a partner?
  • What do we offer to a partner?
  • What do we want from this merger?
  • What are we willing to give up?
  • What are our deal breakers?

 Once done, they should meet to go over their answers and make a best effort to resolve differences.  If there are no mutual dealbreakers, then move to the next step.  If there are, then part ways and move to the next potential partner.

 Month 2 determines the operational structure of the combined organization.  In addition, this month is used to develop financial models for newco, examining financial viability and sustainability. Among the areas to be analyzed:  potential program growth and savings opportunities, the impact on donative funding, what amount of operational savings can be expected?  If the operational structure and financial modeling are positive, then move to the next step. If it is not, move to the next potential partner.

 Month 3 develops the MOU and is based on the work done in the previous two months.  If your organization and your potential partner have gotten through the first two months, the “bones” of the structure for the MOU should already be done.  You know why you want to merge.  You know what you need in the merger.  You know what you have to offer the merger.  You have worked through your dealbreakers.  You have an operational structure and you have shown financial viability. The MOU can have a “closing date” for when the two organizations will come together.

 To misquote Churchill, this is the end of the beginning.  There is much more to be done:

  • Merger and Integration planning – bringing the cultures together
  • Staffing – determining how to address staff issues
  • Communications – how, when, what and to whom do you message this

 The David Ping Group has done this successfully.  We would be honored to work with you.