Submitted by Jean Butzen on June 5, 2014 - 13:28

Helping Board Members Read the Signs for a Nonprofit Merger

In this age of tremendous change and economic uncertainty, I am often asked by board members if they should consider a merger strategy for their nonprofit organization. Board members who work in the for-profit sector are familiar with the signs leading up to a merger in their own business arena, but not necessarily for the nonprofit sector. Have you seen these signs?

  1. Are you having trouble raising unrestricted dollars? Are you looking to expand your programs or your geography?
  2. Do you require new licenses or certifications to grow?
  3. Do you have a need for deepening the quality of your back office services, particularly for I.T. or outcome measurement, but do not have the capital to do so?
  4. Do your clients, donors, and others frequently confuse your nonprofit with another organization?
  5. Do Donors frequently encourage you to consider a merger?

In general, it’s a good idea to regularly review a merger or restructuring strategy for your nonprofit at least every few years when you complete a strategic plan. By doing so, you will become comfortable with a merger strategy and learn how to assess it. You never know when a good merger opportunity might come along, such as when the CEO of a trusted partner suddenly announces s/he is leaving. One Minnesota study of nonprofit mergers noted that over 80% of the mergers had a vacancy in one of the CEO positions.

Strong nonprofits are in a better position to merge, than those which are weak. It can be very hard to find a merger partner for a nonprofit with little or no assets and a history of financial deficits. If you think a merger may be in the future of your nonprofit, the sooner you act when your financial position is strong, the better.

These are just a few of the signs you and your fellow board members can watch for regarding a potential merger strategy for your nonprofit. To learn more about the signs like the ones in this posting, take our “Merger Test” at Mission + Strategy Consulting. For a free consultation, contact us at: 800-343-2510.

- Jean Butzen is the President and Founder of Mission + Strategy Consulting, the Midwest’s largest consulting firm providing nonprofit restructuring services.