Nonprofit Mergers and Alliances

THOMAS A. MCLAUGHLIN is Vice President for Consulting Services for the Nonprofit Finance Fund, a national leader in financing nonprofits, strengthening their financial health, and improving their capacity to serve their communities. He is nationally recognized as an expert in nonprofit mergers and alliances, having consulted nonprofits in over 200 such collaborations. He is contributing editor for the Nonprofit Times, for which he writes a monthly column, and is the author of Streetsmart Financial Basics for Nonprofit Managers, Third Edition (Wiley). He is also a member of the faculty at the Heller School for Social Policy and Management at Brandeis University.

• Acknowledgments xiiiIntroduction xvChapter 1 A Valid Strategic Option for the Future 1Government’s RetreatChapter 2 The Freestanding Nonprofit and Other Rugged Individualists 5Why Nonprofi t Services Are Fragmented: A StoryA Nonprofi t’s Economics Are Part of Its StrategyChapter 3 Logic of Integrated Service Delivery 17Applications of Integrated Service DeliveryElements of IntegrationChapter 4 Deciding to Collaborate 25Rescue MergersMerger from StrengthDeciding to Collaborate as a Function of Larger ForcesChapter 5 Preserving Identity 33Nonphysical Components of Organizational IdentityWhat Is Not Part of “Identity”—and What IsChapter 6 The Role of Funders 37What Funders Can DoFunding CollaborationsModels for Funding CollaborationsQuality Assurance through FoundationsChapter 7 C.O.R.E. Continuum of Collaboration 47Our ModelApplying the C.O.R.EChapter 8 Economic-Level Collaboration 53Sharing InformationBidding JointlyJoint PurchasingChapter 9 Responsibility-Level Collaboration 57“Circuit Riders”High-Integration Collaboration ModelsA Cautionary NoteChapter 10 Operations-Level Collaboration 61Shared TrainingJoint ProgrammingJoint Quality StandardsChapter 11 Corporate-Level Collaboration: Merger 65Authority Is ConcentratedOffi cial Start Dates May Be AnticlimacticWhat It Means to MergeThe Essence of a Nonprofi t MergerAdvantages and Disadvantages of a MergerChapter 12 Models of Collaboration: Merger by Management Company 83StructureControl and GovernanceAdvantages of a Management CompanyDisadvantages of a Management CompanyFaulty Integration in a Management Company ModelChapter 13 Models of Collaboration: Alliances 93StructureChapter 14 Models of Collaboration: Partnerships with and between Nonprofits 99StructureControl and GovernanceSpecial ConsiderationsPartnerships with For-Profi t CompaniesLimited Liability CompaniesChapter 15 Merger Myths 107We Will Save Administrative CostsThere Will Be Massive Job CutsWe Will Lose Our IdentityLet Us Figure Out the Structure FirstShhhOnly Failing Organizations MergeIncrease in Mergers Is a Product of an Economic DownturnChapter 16 First Steps 113Geographic ProximityAbsence of a Permanent CEONonoverlapping MarketsIndustrializers and PrototypersCompatibility of ServicesSpecial AssetsRole of CultureRole of ClassQuick Culture CheckBuilding TrustSeeds of Trust: Disclosure, Consultation, and CollaborationChapter 17 Merger or Alliance? How to Decide 131Corporate ControlChapter 18 First Phase of a Merger: Feasibility Assessment 147Informal Phase of a CollaborationRole of ConsultantsForm a Collaboration CommitteeWhy Due Diligence?What Is a Due Diligence Investigation?GovernanceFinancesAssetsLiabilities and ObligationsSome Financial Red FlagsValuationsCarrying Out the ValuationPro Forma Financials, Including Cash FlowsRegulatory FilingsHuman Resources InformationAssess the FeasibilityChapter 19 Second Phase of a Merger: Implementation Planning 175Form Subcommittees of the Collaboration CommitteeInternal CommunicationExternal CommunicationSome Sample Collaboration Committee StructuresWho Will Be the Boss?Some Tools to Accomplish a Leadership TransitionOnce the Selection Is Made . . .Creating the Formal AgreementMerger Announcement (Create a Splash)Chapter 20 Third Phase of a Merger: Integration 205Time Required for IntegrationCommon Sources of ResistanceChapter 21 The Seven Stages of Alliance Development 219Categories of AlliancesSeven Tasks of Alliance DevelopmentTask One: Initiate, Explore, and AnalyzeTask Two: Synthesize and PlanTask Three: Establish Shared ObjectivesTask Four: Develop Working Committee StructureTask Five: Gain Quick VictoriesTask Six: Secure Institutionalize Buy-inTask Seven: Implement and EvaluateChapter 22 Postscript and Conclusion 251About the Author 253Index 255