Lesson from Mergers: Pursue them When Your Agency is Healthy!
In an article published in the December 2008 issue of the Chronicle of Philanthropy, the Bridgespan authors discussed their findings from research examining 3,400 nonprofit mergers which occurred over a decade. There were some very interesting discoveries they identified, including the fact that mergers happen at about the same rate in the nonprofit sector as they do in the for profit sector.
But the one fact I want to point out today is that leaders most often cited financial distress and leadership vacancy as the two reasons they most often sought a merger. The authors make the distinction between opportunistic and strategic reasons for seeking a merger. For instance, the previous reason - financial distress - would be an opportunistic reason for seeking a merger. Opportunistic reasons often come late in the game when the organization may be seeking stability more than expansion. Strategic reasons happen earlier in the organizational development process, before there is financial stress, actually when your organization is healthy but starting to tap out its funding, geography, skill set, etc. This is when there may be an opportunity to expand impact more efficiently by combining programs, geography, skills, assets, leadership, and opportunities between two or more nonprofits.
The authors present an excellent example of a strategic use of merger strategy in their article. Are you looking for ways to stretch the social value of nonprofit organizations? You can do so through mergers, but you need to be strategic. Think earlier in the process, not just when you are ready to leave a leadership position or when you are in financial distress. Do it when your agency is healthy! Is there a strategic merger you can identify for your nonprofit which would grow the social value you can provide to your community?