New merger toolkit for NFPs

The trend towards a reduction in funding and revenue is creating new difficulties for many not- for-profit (NFP) entities.

State and Federal Government funding is trending downwards as governments become more austere in the face of recurrent deficits and private sector revenues are struggling with the transition from the mining boom. In this environment, what options are open to NFPs caught in the crossfire?

One option that is becoming a more serious consideration is merging with or acquiring another compatible NFP. This option can be of benefit to members and beneficiaries, can augment overall expertise, reduce duplicated costs and importantly increase revenues.

An example of this type of merger happened officially on 1 July this year between Good Beginnings and Save The Children to create one of Australia’s leading child welfare agencies. The merger allows the combined entity to increase its influence on government policy, combine programs and leverage expertise. 

The process of initiating and completing a merger however can be an onerous exercise and requires effective leadership and communication. Therefore, it is important to work through a series of steps at the outset:

  • Be aware of the resources and time required.
  • Identify and engage a suitable prospect.
  • Establish if there is a cultural fit.
  • Develop clear objectives and responsibilities.
  • Be prepared for  legal complexities.

To assist NFPs considering this path, Mills Oakley Lawyers has developed an NFP merger toolkit. The toolkit outlines the steps to consider in a merger scenario. Its practical information highlights details of the feasibility study phase to completing a memorandum of understanding agreement (MOU) through to negotiation, due diligence and settlement. It also provides examples of various structures and their various advantages and disadvantages.

You can view the toolkit here.

Are you a non-executive director of an NFP organisation? If so, we need your input into the Australian Institute of Company Directors’ NFP Governance and Performance Study. In addition to analysing information about cross-sector issues, this year we are focusing on NFP mergers, the arts sector and governance in federated structures. You can complete the survey here.