MERGERS: Not a Four-Letter Word

MERGERS: Not a Four-Letter Word (pdf)

Executive Summary

Mergers have long occupied a complicated place within the not-for-profit (NFP) sector.  NFPs pursue mergers to increase their impact and improve services while becoming more efficient over the long term. On the other hand, mergers are seen as funder-driven. Some NFPs fear that mergers can cause a loss of identity, autonomy or even a sense of failure.

Through our Challenging Times research (pdf), community roundtables, collaboration symposium and
research project
(pdf), the Ontario Trillium Foundation has heard that collaboration is increasing and the sector is experimenting with different forms of strategic restructuring such as shared services or spaces. We also heard the sector say it is highly fragmented, with NFPs and charities trying to carve out their place on the crowded landscape.

While there seems to be a great deal of excitement around collaboration, there is little information and dialogue around mergers in Ontario's NFP sector. Between April 1, 2004 and June 30, 2010, OTF has approved 15 grants worth close to $1.3M in Ontario communities for projects related to mergers and amalgamations of organizations. Through these grants we have learned that merging is complex but can be very powerful.

Given both the risks and opportunities that mergers present, we are keen to engage in a conversation about what this changing landscape means for communities, the sector, and its funders. We are taking the first step in that dialogue by exploring five stories of organizations that have merged, lessons learned and implications for funders

The Stories:

Big Brothers Big Sisters of Windsor & Essex County:
  This case reminds us that a merger is a long-term serious commitment that requires thoughtful consideration and consent from both sides in order to be successful.

Club Action Hearst: The story of two organizations from Northern Ontario that decided to merge into a single entityafter recognizing that they were providing almost identical services to Franco-Ontario seniors.

Centre Wellington Minor Hockey Association: How two competing hockey associations realized they need to come together in a single organization, illustrating a merger requires as much psychological and emotional preparation as it does organizational.

East Scarborough Storefront:  The partnership between a network of agencies and residents with an alternative governance platform highlights Storefront's creativity and innovation in searching for a practical solution to their unique situation.

North York Meals on Wheels and More:  A story about an organization that pursued two mergers, one that did not come to fruition and one that was successful. This example highlights the importance of choosing your partners carefully, not all matches are made in heaven

The Learning:

Our sector is changing. While this is not a new phenomenon, the current climate of decreased revenues and increased service demands is challenging non-for-profit organizations to think more creatively about how they fulfill their missions. Likewise, funders are being challenged to think about how best to support this work, particularly to drive innovation and greater impact in the sector. Pursuing partnership and collaboration are effective ways to achieve these goals.

A merger can be transformative when the right conditions are in place1:

  • Sound strategic and community benefit: The primary motivation to merge cannot be for the sake of survival - nor should it been seen as a rescue boat for failing organizations. There has to be positive outcomes for the organizations involved and the communities impacted.
  • Full commitment of leaders of both organizations: Buy-in is important at the staff, volunteer and board levels. Moreover, both entities have to be committed to make the merger work. A successful merger is not possible if only one party is moving the ball forward. 
  • Merger is well resourced: Mergers are complex endeavors that require both financial and non-financial resources.
  • Cultures are compatible:  Combining very different organizational cultures is sometime more challenging than the administration and legalities associated with amalgamation. On the other hand, compatible organizational cultures can be essential driving forces behind successful mergers.

The Funder's Role:

Many respondents interviewed through OTF's Collaboration research project stressed the importance of enabling, not mandating collaborations. Research confirms that the most successful collaborations are those that happen because individuals, groups and NFP organizations identify a shared need, not because a funder requires it2

We have the best impact when we think and act systematically and strategically about types of support that we provide at different stages across the collaboration spectrum.  Ultimately we should work to create a climate where mergers and other partnerships can succeed3:

  • Engage the sector in conversations about mergers as one way to support collaboration, efficiency, and innovative ways of working together.
  • Create space for those engaged in merging or other strategic restructuring to share and learn from their experiences.
  • Embrace flexible funding approaches that match the complexity of the partnership, such as developmental grants, multi-year initiatives, and covering costs critical to the success of the collaborative.
  • Know the terrain. Make sure decision-makers understand the complexities involved with mergers. Don't underestimate the costs and time involved.
  • Think outside the box: provide support for new and emerging partnerships, such as alternative governance platforms.

We hope this article will inspire other funders and NFPs to share experiences and learn from one another. This will grow our collective knowledge around mergers and structural changes that will contribute to a stronger and healthier nonprofit sector. We invite you to be in touch, post a comment on our blog and share this article with others in the field to continue the conversation. 

1 Creating an Environment for Success: Mergers And Other Partnership Structures For Environmental Nonprofits, Institute for Conservation Leadership, 2010

2 Strengthening Collaboration in Ontario's Not-for-profit Sector, Ontario Trillium Foundation, 2010