Submitted by Jean Butzen on November 9, 2008 - 08:40

"A Trip Down Merger Lane"

Today’s economic troubles have taken me down memory lane. It was just after the economic turmoil following 9/11 that my own nonprofit came to terms with deciding to seek a merger for our organization. I was the president of a supportive housing corporation in Chicago that wanted very much to grow. But because the stock market had declined so much, our local foundations and corporations had significantly cut their funding to most nonprofits, including our organization. Government funding, too was cut due to losses in the tax base. Not only was it impossible to grow because there was no unrestricted capital to do so, but we were having trouble raising the funding just to maintain our existing portfolio of 1,000 units of housing for the homeless.
Yet, I knew that it would be possible to expand our efforts for the homeless if we could think outside of the fundraising box – by instead seeking a merger with a larger nonprofit. It was a revolutionary idea for a relatively healthy nonprofit to seek a merger simply for the sake of growing its housing and services. But that’s what we did.
Since our merger closed in 2005, many positive things have happened to our former organization’s assets. Our trademark housing and services expertise is being shared with markets around the country where our partner does business. And our housing portfolio, much of which was old and ready to be re-financed, has been preserved and is in the process of being renovated by the (much larger) succeeding merger partner.  Our former mission continues and our assets are secure, meaning our 1,000 clients have a place to call home and the services they need to maintain their housing – which is so important in these difficult economic times. Now, almost three years after the merger closed, it seems as if we were prescient in seeking the merger given the fact that we are now in the midst of the worst financial re-structuring since the Great Depression. Certainly not everything about the merger has been perfect, but given the choices it still seems like it was the right decision.
I wonder, are you a nonprofit leader whose own nonprofit is in the same position that mine was five years ago when we started the merger process? Is yours a mid-size agency that is strong and that wishes to grow, but you don’t have the financial capital to do so? Is your unrestricted financing shrinking? Are you having difficulty raising the quality of your back-office services because you can’t afford the investment? Is it time for you to think about seeking a full or partial merger partner for your nonprofit?