Nonprofit Mergers & Alliances (2nd ed.)

I'm currently reading the recently published 2nd edition of Nonprofit Mergers & Alliances by Thomas A. McLaughlin and can already recommend it to nonprofit executives and board members thinking about collaborations and/or mergers.  Indeed, the book had me at "hello" or, rather, its first sentence:  "The best time to consider a merger or an alliance is before it is necessary, when coming together with another organization will mean combining strength with strength, and when the collective energies and the creativity of the two or more entities can be used proactively instead of being sapped by the demands of crisis management."  It's not that a weakened organization should not seek a merger; rather, the most benefits from a merger will result from a merger of strengths.

Nonprofit Mergers & Alliances

McLaughlin, Vice President for Consulting Services for the Nonprofit Finance Fund, discusses early in the book why nonprofit services are fragmented and how consolidation is part of a nonprofit's life cycle.  He devotes a chapter to integrated service delivery and why it will be "a central goal of the next generation of nonprofit managers."  Key to such integration is the use of information as a strategic tool and the consequent need to invest in expensive information technology.  And this will "boost the minimum economic size in virtually all fields, which in turn will put more pressure on groups to merge and find new ways of collaborating."

The book identifies four levels on which nonprofit collaborate:  Corporate, Operations, Responsibility, and Economics.  A merger is defined as a collaboration that entails change on all four levels.  An alliance is defined as a collaboration that entails change on one to three levels (not including the "Corporate" level).  

Mergers are more fully described with helpful discussions of pros and cons, myths, and common issues, including size of the board, composition of the board, and selection of officers.  McLaughlin further breaks down a merger into three phases:

  1. Feasibility Assessment.  "The objective is for planners to learn about each other's organization and to conduct some serious analyses of the major aspects of each.  The result of this stage should be an agreement to proceed – or not."
  2. Implementation Planning.  "During this stage, the participants carry out deeper analyses as necessary and formulate a plan for how to make the collaboration succeed."
  3. Integration.  "This is where the plain old day-to-day management work occurs.  Often the bulk of executing the integration plan falls on managers and staff support people who were not as intimately involved in the first two phases."

The final chapter in the book discusses "The Seven Stages of Alliance Development" and notes that "alliances are far more open-ended and inherently ambiguous than outright mergers."  McLaughlin emphasizes that "the thing that makes them even more difficult is that leadership in an alliance derives not from an assigned position or role but rather from a delicate mix of personality, organizational identity, and resources."  The seven stages of alliance development are:

  1. Initiate, explore, and analyze
  2. Synthesize and plan
  3. Establish shared objectives
  4. Develop a working committee structure
  5. Gain quick victories
  6. Institutionalize buy-in
  7. Implement and evaluate

Mergers are like marriages – they vary widely and there is no single formula or book to ensure a particular merger's success.  But Nonprofit Mergers & Alliances is a good primer (and reader-friendly, as claimed on the book jacket).  It covers a very complex area and contains many practical tips and common pitfalls.  And executives and board members of nonprofits would be wise to review a good resource on nonprofit mergers even if they should also retain a merger consultant and attorney (both highly recommended, resources permitting).