Collaboration with external partners is often mentioned as a top priority to enable nonprofits to more effectively and efficiently advance their missions. Collaborations may take on many different forms: from informal understandings between organizations regarding the sharing of information to formalized affiliation agreements creating regional chapters, and from joint ventures between nonprofit and for-profit organizations to mergers between two or more nonprofits. Performing appropriate due diligence before entering into a collaborative relationship, providing for proper terms and conditions in a written agreement (to ensure compliance and risk management), and understanding the nature of the transaction and any potential alternatives are all critical to managing and governing in the best interests of an organization.
When two nonprofit corporations merge, the combined entity (legally, the surviving corporation) may adopt a very different governance model than that of either corporation. Particularly where neither corporation is in crisis, the board of the combined entity may include an agreed upon percentage of directors from each corporation. But...
As we have discussed in previous posts on the motivations and the risks associated with nonprofit mergers, nonprofit leaders should enter into any merger discussions with sufficient knowledge and understanding to make sound decisions. In this post, we identify 8 tips and 8 traps of nonprofit mergers. 8 Tips...
A charitable nonprofit may engage in a joint venture (JV) with a for-profit entity subject to some important limitations. It’s critical for nonprofit leaders to understand these limitations in contemplating and negotiating a JV to avoid jeopardizing its tax-exempt status, unlawfully diverting charitable assets, and conferring a prohibited private...
In response to the COVID-19 pandemic, the associated financial and social crises, and the rising racial justice movement, many nonprofits are looking at collaborations and mergers as a strategic response. But nonprofit leaders must understand at the outset the risks associated with such transactions. Following up on our recent...
Facing the severe impacts of the current public health and economic crises, many nonprofits are considering mergers and other forms of collaboration as a strategy for maintaining or strengthening their programmatic activities, their brand and clout, and, for some, their survival. Prior to entering into any negotiations around a...
I’ll be on on Nonprofit Radio this Friday, July 24, at 10:00 am PT / 1:00 pm ET talking with host Tony Martignetti about nonprofit collaborations right after he speaks with his other guests Jacqueline Copeland and Valaida Fullwood about Black Philanthropy Month. You can listen live on Talking Alternative. The archived podcast will be available...
There are many ways in which two or more nonprofits can collaborate (see La Piana Consulting’s Collaborative Map), including (1) mergers and (2) dissolutions and asset transfers discussed in Part 1 of this series. This post specifically examines a merger between two California nonprofit corporations. Prior to moving forward...
On Tuesday, April 28, at 9 am PDT / 12 pm EDT, I’ll be on Facebook Live with Nadya K. Shmavonian (Partner, SeaChange Capital Partners.) and host Andy Davis (Associate Vice President of Member Education & Outreach, BoardSource) to discuss dissolution and mergers of nonprofits resulting the COVID-19 crisis. We’ll be...
Nonprofit corporations may decide to merge for many reasons, including to better advance a common purpose or to expand the range of services offered to common beneficiaries. Generally, in a simple 2-party merger between A (the surviving corporation) and B (the merging corporation also referred to in the law...
Lara Jakubowski, a Senior Consultant at La Piana Consulting, and I will be presenting a webinar on nonprofit mergers and acquisitions, discussing benefits, risks, and alternatives on February 25, 2020 at 10 am to 11:15 am PST for Clear Law Institute. You can register here. In this practical webinar,...