8 tips for a successful NFP merger

Consolidation in the not-for-profit sector is "unrelenting", says Michael Goldsworthy MAICD, principal consultant at Australian Strategic Services. "We’re seeing between 50 and 100 mergers each year."

Just don’t make the mistake of rushing into a merger, he says.

"As the sector continues to consolidate there are fewer and fewer potential partners on the dancefloor. But that doesn’t mean you have to race into a forced marriage and all of the risks that entails," Goldsworthy says.

One of those risks is putting together two struggling organisations. A merger won’t magically result in one financially viable organisation, says Susan Rix AM FAICD, partner, tax and business advisory at BDO Australia and a director of Cerebral Palsy Queensland.

"You need to be realistic in your due diligence about what changes can be made quickly to ensure the new entity is financially sustainable and more responsive to client needs. If both organisations have been struggling for a long time, where will the capital come from for the necessary changes to systems and processes? And, if both have a culture of bureaucracy, how will being bigger make them more agile?" she says.

Here are two brief examples of successful mergers.

Best practice in health

WHO MERGED? Family Based Care Association (North) and integratedliving Australia merged taking on the name of the latter as the new organisation.

WHY? "We were very concerned about staying viable in a highly competitive environment," says Julia Mollison, an FBCN director. "In order to comply with the aged care reforms we would have to invest in new business systems and structures and also start actively competing for business. We decided that a merger would make strategic sense."

WHAT HAPPENED? As one of two former FBCN directors on the integratedliving Australia board, Mollison is satisfied that the process was worthwhile. "We have greater security of ongoing service provision for clients, plus greater security of employment and improved career opportunities for our staff," she says. "We’re also part of a progressive and growing organisation."

Birds of a feather go well together

WHO MERGED? Birds Australia and Bird Observation & Conservation Australia (BOCA) merged in 2010.

WHY? Joining forces would enable them to create a stronger voice for Australia’s birds without duplicating resources or effort. The organisations had collaborated in the past and had some common membership.

WHAT HAPPENED? There were unexpected benefits. "The merger was finalised just before we lost a lot of government funding, and I don’t think anyone had predicted how much better placed we would be to cope with this challenge," says Gerard Early GAICD, chairman of Birds Australia. "The current board also has a broader skill set because we were able to draw on the complementary strengths of both previous boards."

8 tips for a successful merger

1. Know your own organisation well. Be honest about its strengths and weakness and the barriers that are preventing it from having a bigger impact.

2. Leave your ego at home. Make sure you’re acting for the organisation and its members.

3. Know what is important to members and how the merger will benefit them now and into the future.

4. Get data and help from an independent source to establish the possible benefits and costs of a merger. Bear in mind that not all of the benefits will be realised and that costs could double.

5. Resource the merger. Employ a specialist team to integrate the two organisations.

6. Establish a board subcommittee to oversee the merger and keep others informed.

7. Bring in experts to help with the process.

8. Establish a second board sub-committee to maintain communication with members and reassure them that the merger is in their best interests.

This is an edited extract of an article that first appeared in Company Director magazine.

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