Kenneth GroundsMcCormick GroupOctober 17, 2012

Non-Profit Merger:A Key to Building Capacity

and Survivability

Finance and AdministrationRoundtable

What Is The McCormick Group And What Are They Doing Here?

Formed in 1982 by Dan McCormickThree primary competencies:

1. Create/establish new NPOs2. Assist organizations with structural change/collaboration & merger3. Guide NPOs through best practices screening and Modeling

Clients include: American Cancer Society; Girl Scouts of the USA; The Arthritis Foundation; National Hemophilia Foundation; John Denver’s Windstar Foundation; United Way Worldwide and hundreds of others.

Paraskevidekatriaphobia:

Fear of Friday the 13th

Paraskevidekatriaphobia:

Big Word

No one knows why.

As many as 21 Million people in the USAhave some fear of Friday the 13th.

Paraskevidekatriaphobia:

Connotes a fear that cannot usually be substantiated.

Fear comes largely from anecdotal information:stories we have heard.

“Not sure what the issue with Friday the 13th is allabout but it pays to be careful.”

Non-profit organizations have their own Friday the 13th Word …

Perceptions: What Do We Hear?• “I’m not sure what is going to happen”• “There seem to be many unanswered questions.”• “I’m worried something bad will happen.”• “I’m feeling a sense of potential loss.”

Perceptions: Other Drivers• Family and friends whose company merged• Stories about what a mess mergers can be• Fears that longtime staff will be fired• Concern that ‘bigger is not always better’

Facts Can Be Negotiated, Perceptions CannotFacts Can Be Negotiated, Perceptions Cannot

Perceptions: NPO Merger

Many NPO merger fears and misconceptions arise from an

assumption that non-profit merger is the same as for-

profit merger.

For-Profit Not-For-Profit For-Profit Not-For-Profit

Money MissionMoney Mission

Perceptions: Understanding NPO Merger

For-Profit merger is about money: The value proposition can be determined clearly on the front end.

NPO Merger is about mission: It is not about trying to live up to an artificial financial pro-forma.

For-Profit Not-For-Profit For-Profit Not-For-Profit

Perceptions: Understanding NPO Merger

Positioning for the future

Increasing Capacity/scale

Acquisition/hostile takeover

Money/shareholder equity

Downsizing staff

Economies/cost cutting

Management Control

Positioning for the future

Increasing Capacity/scale

Never, all must agree

Mission impact

Not usually

Yes, but not a primary driver

Sharing governance

CollaborationsLots of optionsSome involve trading/sharing excess capacities

Program/marketing/expertise/backroomSome involve gaining economies of scale

Combined purchasingSome involve helping donors

Combined campaigns/recognition

CollaborationsSome involve helping other agencies

Shared mission prioritiesAll should lead to greater impact for our causesAll collaborative forms are on a continuum

THE COLLABORATIVE CONTINUUM

COMPLEXITYPOTENTIAL BENEFITS

INITIATIVES

INSTRUMENTS

CommunicationShared

ServicesJoint

VenturesShared

Governance Merger

MOU/LOA* Contract LegalFiling

*Memo of Understanding / Letter of Agreement

In Other Words…

Courting Your Partner

Flirtingo Identifying a Partnero Exploring Synergieso Establishing Trust

Datingo Exploring “What could it look like”o Learning about Wartso Building Trust

Meet the Parentso Volunteer Involvemento Community Discoveryo Building Trust

Moving in Together (optional)o Shared Serviceso Collaborative Ventureso Discovering Warts

Courting Your Partner

Engagemento LOI (“Letter of Intent”)o Due Diligence (wart hunt)o Corrective Action (if needed)

Dowryo Promise -- Vision

Courting Your Partner

Marriageo Merger Agreemento Board Votes

Announcemento Launch Strategy

Filing the Licenseo Closingo Fulfilling Conditionso Regulatory Filings

Courting Your Partner

Making it Work (integration)o Cultureo Development & Marketing o Mission Impacto Systemso Finance

Courting Your Partner

All collaborations are on a continuum The exploration/discovery process is nearly the same for all forms of collaboration NPO mergers are not the same as for-profit mergers (mission vs. bottom line) While efficiencies will be gained, mission impact is the key driver It all starts with a “conversation”

Key Takeaways…

Thank You