Nonprofit Mergers and Alliances, Second Edition

268 Pages·2010·3.35 MB·English

by  Thomas A. McLaughlin(auth.)

Nonprofit Mergers
and Alliances
Nonprofit Mergers
and Alliances
SECOND EDITION
Thomas A. McLaughlin
John Wiley & Sons, Inc.
Copyright © 2010 by Thomas A. McLaughlin. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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ISBN-13 978-0-470-601631
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
To Gail, Paul, and Emily
Contents
Acknowledgments xiii
Introduction xv
Chapter 1 A Valid Strategic Option for the Future 1
Government’s Retreat
Chapter 2 The Freestanding Nonprofit and Other Rugged Individualists 5
Why Nonprofi t Services Are Fragmented: A Story
A Nonprofi t’s Economics Are Part of Its Strategy
Chapter 3 Logic of Integrated Service Delivery 17
Applications of Integrated Service Delivery
Elements of Integration
Chapter 4 Deciding to Collaborate 25
Rescue Mergers
Merger from Strength
Deciding to Collaborate as a Function of Larger Forces
Chapter 5 Preserving Identity 33
Nonphysical Components of Organizational Identity
What Is Not Part of “Identity”—and What Is
Chapter 6 The Role of Funders 37
What Funders Can Do
Funding Collaborations
vviiii
viii Contents
Models for Funding Collaborations
Quality Assurance through Foundations
Chapter 7 C.O.R.E. Continuum of Collaboration 47
Our Model
Applying the C.O.R.E.
Chapter 8 Economic-Level Collaboration 53
Sharing Information
Bidding Jointly
Joint Purchasing
Chapter 9 Responsibility-Level Collaboration 57
“Circuit Riders”
High-Integration Collaboration Models
A Cautionary Note
Chapter 10 Operations-Level Collaboration 61
Shared Training
Joint Programming
Joint Quality Standards
Chapter 11 Corporate-Level Collaboration: Merger 65
Authority Is Concentrated
Offi cial Start Dates May Be Anticlimactic
What It Means to Merge
The Essence of a Nonprofi t Merger
Advantages and Disadvantages of a Merger
Chapter 12 Models of Collaboration: Merger by Management Company 83
Structure
Control and Governance
Advantages of a Management Company
Disadvantages of a Management Company
Faulty Integration in a Management Company Model
Chapter 13 Models of Collaboration: Alliances 93
Structure
Contents ix
Chapter 14 Models of Collaboration: Partnerships with and
between Nonprofits 99
Structure
Control and Governance
Special Considerations
Partnerships with For-Profi t Companies
Limited Liability Companies
Chapter 15 Merger Myths 107
We Will Save Administrative Costs
There Will Be Massive Job Cuts
We Will Lose Our Identity
Let Us Figure Out the Structure First
Shhh
Only Failing Organizations Merge
Increase in Mergers Is a Product of an Economic Downturn
Chapter 16 First Steps 113
Geographic Proximity
Absence of a Permanent CEO
Nonoverlapping Markets
Industrializers and Prototypers
Compatibility of Services
Special Assets
Role of Culture
Role of Class
Quick Culture Check
Building Trust
Seeds of Trust: Disclosure, Consultation, and Collaboration
Chapter 17 Merger or Alliance? How to Decide 131
Corporate Control
Chapter 18 First Phase of a Merger: Feasibility Assessment 147
Informal Phase of a Collaboration
Role of Consultants
Form a Collaboration Committee
x Contents
Why Due Diligence?
What Is a Due Diligence Investigation?
Governance
Finances
Assets
Liabilities and Obligations
Some Financial Red Flags
Valuations
Carrying Out the Valuation
Pro Forma Financials, Including Cash Flows
Regulatory Filings
Human Resources Information
Assess the Feasibility
Chapter 19 Second Phase of a Merger: Implementation Planning 175
Form Subcommittees of the Collaboration Committee
Internal Communication
External Communication
Some Sample Collaboration Committee Structures
Who Will Be the Boss?
Some Tools to Accomplish a Leadership Transition
Once the Selection Is Made . . .
Creating the Formal Agreement
Merger Announcement (Create a Splash)
Chapter 20 Third Phase of a Merger: Integration 205
Time Required for Integration
Common Sources of Resistance
Chapter 21 The Seven Stages of Alliance Development 219
Categories of Alliances
Seven Tasks of Alliance Development
Task One: Initiate, Explore, and Analyze
Task Two: Synthesize and Plan
Task Three: Establish Shared Objectives
Task Four: Develop Working Committee Structure
Contents xi
Task Five: Gain Quick Victories
Task Six: Secure Institutionalize Buy-in
Task Seven: Implement and Evaluate
Chapter 22 Postscript and Conclusion 251
About the Author 253
Index 255
Acknowledgments

E
ven more than the fi rst edition, this version has benefi ted tremen-
dously from the contributions of many individuals. Since that fi rst
edition was published, I have consulted to more than two hundred
nonprofi t mergers and alliances, and virtually every single one
provided an important insight or a fresh perspective.
I carried out my fi rst mergers for Dr. Yitzhak Bakal at what is
now known as the North American Family Institute, although I would
not have said that ’s what I was doing at the time. It was on this initial
base of experience that I later built a successful consulting practice
in nonprofi t collaborations. I applied some of my early methodolo-
gies on behalf of Punky Pleten - Cross, Kathy Wilson, Dianne McCarthy,
Geri Dorr, and Deb Ekstrom. Early on, a handful of individuals made
valuable suggestions, challenged my concepts, or helped clarify parts
of my thinking. Ginny Purcell, Jim Boles, Kitty Small, Bill Taylor, Jim
Heller, Rob Hallister, and Sue Stubbs are among these.
I have had the benefi t of working with many talented colleagues.
For nearly a decade, Stacey Zelbow has supported and challenged
me as we worked with various nonprofi t collaboration clients too
numerous to count. Her steady presence has been an enormous
benefi t, and her detailed comments on an early draft of this edition
helped improve it far beyond what I could have achieved on my own.
Over the years, literally dozens of leaders in foundations, asso-
ciations, nonprofi t federations, government agencies, and academic
institutions have given me the opportunity to speak to their members
and constituents about collaborations in one way or another. I deeply
appreciate these opportunities to hone a message that resonates with
large numbers of nonprofi t leaders.
My colleagues at the Nonprofi t Finance Fund have been
wonderfully receptive and accepting of this new kind of consult-
ing capability that I have recently begun building on the excellent
foundation they laid over the last twenty - nine years. Clara Miller,
xiii