Top Tips for NFP Mergers
13 October 2015 at 11:45 am
In an environment of greater competition with corporations, a tough fight for funding and growing demand for services, many Not for Profits are looking to mergers as a solution but they are unsure where to start.
National youth charity, Whitelion CEO, Mark Watt told Pro Bono Australia News that Whitelion mergers with Open Family, Stride and Balga have saved almost $1 million in the back-of-house costs.
“There are a lot of organisations that aren’t going to exist if they don’t merge because of the financial environment we’re in,” Watt said.
“Things are becoming more complex to run an organisation, it’s becoming more expensive to run an organisation, and it’s becoming more demanding to run an organisation.
“So a lot of organisations will have to close the door if there is a resistance to merging.”
He said merging can be a “very emotional” process as it concerns the identity of the organisation and questions must be considered around, “how you keep your history and legacy of the organisation within a merge, how you keep the brand alive within the organisation.”
“You also don’t want to lose a lot of the goodwill you’ve established over many years and a lot of the good practice,” he said.
“A lot of these organisations are looking at closing, but merging well can keep all those things alive. You can keep your identity to some extent, you can keep your legacy.”
The first step, according to Watt, is to perform modelling and decide whether to carry out a full or partial merger, depending on what best suits the organisation.
“Mergers should be encouraged, but it’s more about partnerships where merging is one option in that partnership continuum,” he said.
“Organisations should be looking at how they work together, back of house, fundraising, program partnership, and also merging.
“Merging works really well for strengthening programs, strengthening impact, scaling up, successful program models and also saving money and becoming sustainable.”
Once the objectives are defined partner organisations can be sought through developing partnerships and networks that lead to a merger conversation.
“If you’ve decided you need to merge because of financial reasons, because of program reasons, because of capacity reasons, then you need to start thinking about ‘what sort of organisations could we merge with’,” Watt said.
“You need to understand where you’re heading, you need to get your strategy right about where you’re heading and you need to connect with another organisation that is aligned to that strategy and another CEO.
“You look for there is how sustainable they are, the culture, the type of programs they run, how it all integrates.
“It’s about how sustainable the new entity would be so it really does take a lot of due diligence, it’s a teamwork approach between the two CEOs and the two chairs of the board.”
Watt said the due diligence following a merger agreement is of paramount importance.
“Start getting a team together, a legal team, a human resources team, accountants,” he said.
“It’s very important that you communicate very clearly to all of the people at the relevant times. You need to communicate with the board, staff, stakeholders, funders.
“Get your house in order before you start. It’s really important that you’re prepared as an organisation for a merger, and you understand how your constitution fits."
One of the main challenges in carrying out a merger is blending two that each with their own work practices.
“The cultural differences are really important. Don’t underestimate the effort needed for a successful integration around work ethic, practice frameworks and management. Communication is key,” Watt said.
“That’s why we really insist on a hundred day plan. You do a hundred day plan and try and work out what you’ll do in the first hundred days of the merger.”
Watt also said not to underestimate the importance of building partnerships with corporates who can bring skills and resources to service delivery.
“We’ve got a lot of partnerships with corporates, a lot of successful partnerships with our social enterprise space, our programing space, and our sponsorship space – so we’re working with a lot of companies. Some of them help us with the merging and the strategy,” he said.
“You’ve got to understand each other’s needs. What is the corporate trying to get out of it – are they looking for staff engagement, are they looking for brand recognition, what sort of things do they need.”
He said successful corporate partnerships should have a holistic approach and must be engaging for all staff involved.
“We’ve identified companies that have got an appetite for wanting to have a community partner and we’ve then made it so there’s a lot of touch points, there’s a lot of staff engagement, and we’ve given them opportunities to become involved,” Watt said.
“We also have events that attract corporates, that involve them.That’s one way of them getting involved on a number of levels, they can get involved with young people they can get involved in the organisation, they can get involved in strategy. I think it’s having a lot of touch points is really key to it.”
Whitelion, will be hosting the NFP Merger’s Conference in Melbourne and Sydney on the 29 and 30 October respectively.