S TRATEGIC A LLIANCES IN THE N ON -P ROFIT S ECTOR The Nonprofit Association of the Midlands David...
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Transcript of S TRATEGIC A LLIANCES IN THE N ON -P ROFIT S ECTOR The Nonprofit Association of the Midlands David...
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STRATEGIC ALLIANCES IN THE NON-PROFIT SECTOR
The Nonprofit Association of the Midlands
David M. Thompson
October 31, 2014
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STRATEGIC ALLIANCES - ENVIRONMENT
To achieve efficiencies, strategic alliances can: Eliminate duplication of programming or services Extend an organization’s service area Bring new expertise into the organization Help a peer organization in financial straits
Shifts in the funding environment Budget and other cuts (e.g., sequestration) since Crisis of 2008 More competitive funding environment Increased emphasis on accountability and impact
Sector-specific shifts in approach to programming Increased emphasis on “wrap-around” or “continuum-based”
delivery of services Funder or externally driven collaborations
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STRATEGIC ALLIANCES: BROAD SPECTRUMAutonomy Integration
Collaboration(Low)
Strategic Alliances(Medium)
Corporate Integration(High)
No permanent organizational commitment
Administrative Consolidation
Joint Programming
Fiscal Sponsorship
Corporate Merger/ Acquisition
Parent/Subsidiary
Joint Venture
Decision-making power remains with individual organizations
Decision-making shared or transferred
Decision-making is transferred or combined
Does not change corporate structure
Changes to corporate control/structure
Involves a commitment for the future
Creation or dissolution of one or more organizations
Source: LaPiana Consulting
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EXAMPLE 1: THINKING OF STARTING A NEW NONPROFIT
An individual or group has identified a community need, perhaps in their own neighborhood, and would like to address the issue by becoming a nonprofit. They have volunteered with nonprofits in the past but have little experience in management or governance. Family and friends are serving on the board and everyone is passionate about the issue but may lack knowledge of broader approaches.
Are you a program or an organization?Are you as passionate about financial management & governance as you are about the issue?Is anyone else doing the same thing or something very similar?
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EXAMPLE 2: COLLECTIVE IMPACT
Group of organizations with common agenda
Shared systems for measuring impact of services
Mutually reinforcing activities
Continuous communication
Backbone support organizations
Source: Stanford Social Innovation Review
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EXAMPLE 2: COLLECTIVE IMPACTMETRO AREA CONTINUUM OF CARE FOR THE HOMELESS (MACCH)
macchomeless.org
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EXAMPLE 3: MERGING EXISTING ORGANIZATIONS
In 2011, Omaha by Design commissioned the National Trust for Historic Preservation to evaluate the state of historic preservation activities in the Omaha-Council Bluffs metropolitan area.
The study noted that (1) historic preservation was not a community priority, (2) the movement for preservation lacked vibrancy, and (3) policy barriers were limiting preservation activity.
Three Omaha-based organizations merged in 2013 to form Restoration Exchange Omaha
Another Example: Lutheran Family Services of Nebraska History
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PURPOSE/GOAL OF THE TRANSACTION
What is the primary impetus for the transaction? (political, philanthropic, financial, reputational, etc.)
What are the specific benefits of the transaction? Improvement in the qualify of existing services Improvement in the efficiency (i.e., cost) of existing
services Improvement in the ability to raise funds to support the
mission(s) Addition of new services to the portfolio of the surviving
organization.
Is the transaction consistent with the missions (and any existing strategic planning documents) of the organizations?
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THE PROCESS OF THE TRANSACTION Have there been any evaluations or other studies
that identify needs that merger is intended to address?
How did the partners to the transaction identify each other? Are they equally strong organizations?
Prepare a letter of intent that identifies at least the following: Time period for preliminary discussions by officers/special
committee Time period for due diligence Schedule for presenting transaction to the board(s) Date for consummating the transaction Statutory requirements
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MEMORANDUM OF UNDERSTANDING (MOU)
Future Administration Human Resources/Payment Systems Transitional Leadership Donor Databases Information Technology
Individuals handling transaction should consider Seeking input from across the organization Devoting extensive board attention to considering the
transaction Ensuring that needs have been properly identified Disseminating specific information about how the
transaction will help one or more organizations achieve their strategic goals
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LEGAL COMPLIANCE
Nebraska Nonprofit Corporation Act, Section 21-19, 118 to 123.
Issues from a federal tax perspective See IRS Publication 4779, “Facts About Merging or
Terminating Your Exempt Organization”
Will there be private inurement or private benefit?
Will there be UBIT?
Will the surviving entity need to seek its own 501(c)(3) status?
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THE REALITIES OF MERGER ACTIVITY
Fewer mergers in the non-profit sector than in for-profit
Non-profit mergers tend to involve one or more distressed organizations
The level of merger activity differs from sector to sector (human services, culture, environmental, youth-focused, etc.)
Mergers often suggested by funders, including government
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THE DUE DILIGENCE PHASE
Review of documents (see checklist)
Review of investment and banking relations
Provisions to focus on: Change of control provisions Notice provisions to funders, etc.
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COMMUNICATIONS AND FUNDRAISING
Effect of transaction on relationships with major funders
Effect of transaction on role of surviving entity in the community
How will the transaction be reflected in the branding of the new organization?
How will the new organization’s communications materials reflect the transaction?
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POST-MERGER INTEGRATION
Outreach to staff of organizations in transaction
Plan for leadership transition
Address operational and cultural issues (implementation)
Develop plan for achieving the goals of the merger