​How Mergers Can Benefit Nonprofits

The Street declared 2015 “A Year for the Record Books,” because it was the biggest year on record for mergers and acquisitions. Some of the high-profile mergers that year included Pfizer and Allergan, Charter Communications and Time Warner Cable, and Heinz and Kraft Foods. While these kinds of mergers and acquisitions are common in the for-profit business world, some analysts think it is time for nonprofits to look at the potential benefits.

Northwestern University’s Kellogg School of Management, along with Mission and Strategy Consulting and eight local foundations, collaborated on a study of nonprofit mergers in greater Chicago between 2004 and 2014. The researchers conducted 100 interviews of staff involved with mergers at 25 organizations and also developed a comprehensive analysis of five of those nonprofits. Four failed mergers were included in the analysis. The examinations considered pre-merger, merger negotiations and post-merger impact and included groups from a wide range sectors, industries and scopes of service.

The report, “Mergers as a Strategy for Success,” found that in 88% of these cases, both the acquired organization and the acquiring organization became more successful. (This success was defined as progress toward achieving the nonprofits’ goals and their overall impact in their sector.) 80% of the organizations had a previous collaboration and relationship.

The study found that critical components to a successful merger included developing trust between the parties; agreement in mission; clear goals; understanding each organization for what it is and its strengths and challenges; and CEO, Board and staff buy-in.

Some of the biggest challenges to mergers included finding the right partner; program continuity and “legacy” projects; retention of Board and staff; CEO/Executive Director succession; naming and branding; and integration of the organizations.

The full study, “Mergers as a Strategy for Success: 2016 Report from the Metropolitan Chicago Nonprofit Merger Research Project,” can be found here.