{"id":5043,"date":"2020-06-03T12:06:44","date_gmt":"2020-06-03T16:06:44","guid":{"rendered":"http:\/\/localhost\/osborne\/?p=5043"},"modified":"2021-12-22T17:46:15","modified_gmt":"2021-12-22T22:46:15","slug":"not-for-profit-mergers-in-the-covid-19-world","status":"publish","type":"post","link":"https:\/\/www.osborne-group.com\/fr\/not-for-profit-mergers-in-the-covid-19-world\/","title":{"rendered":"Not-for-Profit Mergers in the COVID-19 World"},"content":{"rendered":"

I\u00a0<\/span>originally published\u00a0<\/span>this blog<\/a> in 2019,\u00a0<\/span>well\u00a0<\/span>before COVID-19. At that time<\/span>,<\/span>\u00a0there were many different reasons why not-for-profits considered mergers<\/span>. They<\/span>\u00a0includ<\/span>ed<\/span>\u00a0<\/span>reduc<\/span>ing<\/span>\u00a0duplication; better coordinat<\/span>ion<\/span>\u00a0of<\/span>\u00a0service delivery; improve<\/span>d<\/span>\u00a0quality of services; and\/or<\/span>\u00a0increase<\/span>d<\/span> efficiency through the merger of backroom services such as finance, human resources, IT, QA, etc.<\/span>\u00a0<\/span><\/p>\n

Today<\/span>,<\/span>\u00a0<\/span>the impact of\u00a0<\/span>COVID-19\u00a0<\/span>on fundraising\u00a0<\/span>is\u00a0<\/span>a new force behind the interest in<\/span>\u00a0mergers<\/span>. COVID-19\u00a0<\/span>has thrown traditional fundraising into a tailspin. Large donors are saying that they are not open to funding new projects<\/span>,<\/span>\u00a0at least for the next 18 months. The funds that they usually have allocated for new projects are being directed toward COVID-19 related projects and towards meeting the increased demands from the projects they are\u00a0<\/span>currently\u00a0<\/span>funding. In addition, the average donor is directing\u00a0<\/span>most of<\/span>\u00a0their charitable donations toward COVID-19 initiatives. This is leaving some charities in precarious situations<\/span>,<\/span>\u00a0with fewer\u00a0<\/span>dollars to meet\u00a0<\/span>ongoing\u00a0<\/span>budget needs.\u00a0<\/span>\u00a0<\/span><\/p>\n

M<\/span>ore and more charities are\u00a0<\/span>beginning to explore\u00a0<\/span>mergers\u00a0<\/span>as a way\u00a0<\/span><\/b>of<\/span><\/b>\u00a0surviv<\/span><\/b>al<\/span><\/b>.<\/span><\/b>\u00a0<\/span>\u00a0<\/span><\/p>\n

If your organization is one of these charities<\/span>,<\/span>\u00a0<\/span>there are a<\/span>\u00a0few helpful tips\u00a0<\/span>you should\u00a0<\/span>consider when looking for a potential partner<\/span>. Wh<\/span>en exploring mergers there are three different types to consider:\u00a0<\/span>\u00a0<\/span><\/p>\n

Horizontal mergers<\/span><\/b>\u00a0occur when two or more organizations provide similar services and merge to create a new, larger organization with\u00a0<\/span>greater\u00a0<\/span>market share.\u00a0<\/span>It focuses on joining operations and programs to enhance service and reduce\u00a0<\/span>backroom\u00a0<\/span>costs.<\/span>\u00a0An example is two similar home care agencies joining forces.\u00a0<\/span>\u00a0<\/span><\/p>\n

V<\/span><\/b>ertical merger<\/span><\/b>s<\/span><\/b>\u00a0join\u00a0<\/span>two organizations that provide services within the same service continuum.<\/span>\u00a0It allows for better integration and control over related elements of service required to meet the needs of clients.\u00a0<\/span>An example is a children\u2019s mental health agency that provides residential treatment and a children\u2019s mental health agency that provides community-based treatment joining forces.<\/span>\u00a0\u00a0<\/span>\u00a0<\/span><\/p>\n

Conglomerate mergers<\/span><\/b>\u00a0occur when two or more organizations offer different services in different markets and create a new, parent organization.\u00a0<\/span>Conglomerate mergers gain diversity in service mix, create larger capacity and revenue base and are undertaken to develop stronger\u00a0<\/span>long term<\/span>\u00a0sustainability.<\/span>\u00a0An example is a child welfare agency, a\u00a0<\/span>children\u2019s mental health agency<\/span>,<\/span>\u00a0<\/span>a\u00a0<\/span>family counselling agency <\/span>and an employment services agency\u00a0<\/span>joining forces.<\/span>\u00a0<\/span><\/p>\n

Merge<\/span>r<\/span>s\u00a0<\/span>can\u00a0<\/span>look different<\/span>\u00a0depending on the sizes of the organization<\/span>s<\/span>\u00a0<\/span>involved<\/span>. If organizations are a similar\u00a0<\/span>size<\/span>\u00a0then the merger will feel like a true partnership or coming together of two organizations. If one agency is significantly larger than the other, or if one is unionized and the other is not then there are very different dynamics that need to be considered and\u00a0<\/span>taken into account<\/span>\u00a0during the planning.\u00a0<\/span>\u00a0<\/span><\/p>\n

Although mergers are often described as creating efficiencies this may only be related to backroom services. Mergers are <\/span>expensive propositions<\/span>, sometimes<\/span>\u00a0in the short and\u00a0<\/span>often\u00a0<\/span>in the\u00a0<\/span>medium term. Since salaries and benefits are approximately 80% of a n<\/span>ot-for-p<\/span>rofit\u2019s budget analysis of any potential merger must <\/span>take into account<\/span>\u00a0the potential costs related to adjustments to salaries and benefits that may arise from a merger. If one or more of the merging agencies are unionized future adjustments related to differences in Collective Agreements need to be considered and planned for.\u00a0<\/span>\u00a0<\/span><\/p>\n

When exploring a potential merger<\/span>,<\/span>\u00a0a list of due diligence tasks needs to be agreed to by the two or more boards of directors who are considering a merger. The list should include an analysis of items such as:<\/span>\u00a0<\/span><\/p>\n