Non-Profit Merger: A Key to Building Capacity and Survivability

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Arthur Alexander
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1 Non-Profit Merger: A Key to Building Capacity and Survivability Finance and Administration i ti Roundtable Kenneth Grounds McCormick Group October 17, 2012

2 What Is The McCormick Group And What Are They Doing Here? Formed in 1982 by Dan McCormick Three primary competencies: 1. Create/establish new NPOs 2. Assist organizations with structural change/collaboration & merger 3. 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.

3 Paraskevidekatriaphobia: Fear of Friday the 13 th

4 Paraskevidekatriaphobia: Big Word No one knows why. As many as 21 Million people in the USA As many as 21 Million people in the USA have some fear of Friday the 13 th.

5 Paraskevidekatriaphobia: as at ap a 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 13 th is all about but it pays to be careful.

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

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

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

9 Facts Can Be Negotiated, Perceptions Cannot

10 Perceptions: NPO Merger Many NPO merger fears and misconceptions arise from an assumption that non-profit merger is the same as for- profit merger.

11 Perceptions: Understanding NPO Merger For-Profit Not-For-Profit Money Mission 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.

12 Perceptions: Understanding NPO Merger For-Profit Not-For-Profit Positioning for the future Increasing Capacity/scale Acquisition/hostile takeover Money/shareholder / h h 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 ggovernance

13 Collaborations Lots of options Some involve trading/sharing excess capacities Program/marketing/expertise/backroom Some involve gaining economies of scale Combined purchasing Some in ol e helping donors Some involve helping donors Combined campaigns/recognition

14 Collaborations Some involve helping other agencies Shared mission priorities All should lead to greater impact for our causes All collaborative forms are on a continuum

15 THE COLLABORATIVE CONTINUUM INITIATIVES Communication Shared Joint Shared Services Ventures Governance Merger POTENTIAL BENEFITS COMPLEXITY MOU/LOA* Contract Legal Filing INSTRUMENTS *Memo of Understanding / Letter of Agreement

16 In Other Words

17 Courting Your Partner Flirting o Identifying a Partner oexploring Synergies o Establishing Trust Dating o Exploring What could it look like o Learning about Warts o Building Trust

18 Courting Your Partner Meet the Parents o Volunteer Involvement o Community Discovery o Building Trust Moving in Together (optional) Moving in Together (optional) o Shared Services o Collaborative Ventures o Discovering Warts

19 Courting Your Partner Engagement g o LOI ( Letter of Intent ) o Due Diligence (wart hunt) o Corrective Action (if needed) Dowry o Promise -- Vision

20 Courting Your Partner Marriage o Merger Agreement o Board Votes Announcement o Launch Strategy Filing the License o Closing o Fulfilling Conditions o Regulatory Filings

21 Courting Your Partner Making it Work (integration) o Culture o Development & Marketing o Mission Impact o Systems o Finance

Key Takeaways All collaborations are on a continuum The exploration/discovery process is nearly the same for all forms of collaboration NPO mergers are not the

22 Key Takeaways 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 fit mergers (mission i vs. bottom line) While efficiencies will be gained, mission impact is the key driver It all starts with a conversation

23 Thank You

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New York Bar admission (or eligibility to obtain admission promptly) is required. Job Opportunities To apply to any of the positions send cover letter referencing job opening with resume and salary requirements to info@bryantrabbino.com Senior Level Corporate Finance Attorney We are