Merging organisations: a tool for growth

In the world of associations, the merging of organizations is often frowned upon. Uncommon and unknown, they tend to be associated with a poor financial health. Worse still, as the author and consultant Thomas McLaughlin points out in his book Nonprofit Mergers and Alliances: “For some in the non-profit field, the idea of mergers is scandalous and tasteless. In a way, it is not surprising that mergers have so few supporters in the community. They are often associated with leadership failure, financial difficulties and rarely good intentions.

But now, it is time to change our point of view. The mergers of CSOs are very promising, as demonstrated by the recent Estudio Metropolitano de Investigación de Fusiones sin Fines de Lucro de Chicago (Metropolitan Chicago Nonprofit Merger Research Study). Nonprofit organisations can and must consider the use of the mergers as an effective tool to achieve its objectives, advance its mission and and augment its impact.

This study is based on a partnership of the Kellogg School of Management, Mission and Strategy Consulting of Northwestern University and eight foundations of Chicago. Together, they completed an analysis of 25 mergers of nonprofit organisations from different sectors which took place in the Chicago area between 2004 and 2014.

The result is definitive. In 88% of the cases, the acquired organisations reported that its organisation was in a better situation after the merger, defining « better » in the sense of achieving the objectives of the organisation and increasing its collective impact. Moreover, the result showed other interesting figures: in 80% of the cases, there was a previous collaboration between the merging organizations; in 85% of the cases, the president of the council of administration or a member of the council of administration of one of the organisations became the main supporter of the merger.

Through this Study, we discovered that the associations that were merged hastily have much less possibilities to achieve a a successful merger than associations that plan their mergers well in advance. Once merged, organizations that claim to be in a better position generally have better financial health. But it is is not just the change in the scale of the market which makes a merger a good thing. This transformation allows the merged organisations to grow to a completely different rhythm than before.

The example of the UCP Sequin Chicago is surprising. In 2013, United Cerebral Palsy (UCP), a nonprofit organisation of $9 million, merged with Sequin Services, a $27 million company, to create UCP Sequin Chicago. For this merger to be successful, a comprehensive, deliberate and particularly thoughtful approach was adopted. It is important to understand that UCP and Seguin knew each other through previous collaborations, and that their partnership spanned more than five years. UCP and Sequin operated separately during more than 60 years in the area of the disability services, with similar offerings and both in good financial health. Despite these similarities, it was their differences that brought them together. UCP has promoted independence for children and adults through a multi-state company called Infinitec. Seguin Industries has pioneered integrated community living in group homes. Therefore, when UCP approached Sequin, it was not difficult for management teams on both sides to see that by negotiating these core competencies through a merger, they would be able to achieve greater organizational strength and industry growth.

So, in a ever-competitive world, it looks necessary today to promote strategic mergers between nonprofit organisations to permit economies of scale, give access to another level of action, and to be an efficient strategy to succeed.