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By Dmitry Volfson, HoganTaylor Assurance Senior Manager

The current nonprofit environment is significantly challenged by the complexity in grant application, increased competitiveness for donor contributions, ability to retain or hire a qualified executive director (CEO), increase in need for services and the list goes on. The opportunity of synergy is instrumental in understanding how to address these significant challenges that face the numerous non-for-profits within our communities by boards and management teams alike.  As boards revisit their strategic plans for the upcoming year, an important point of discussion that needs to be brought to light is the potential opportunity to merge or acquire an agency that has a similar mission or already operates in the space the agency would like to expand.

This concept is not new but can and will create significant challenges for boards and management teams that need to be addressed prior to any intentions of mergers and acquisitions are discussed.  The first step in the process is to identify the agency that will create the synergy necessary for continued growth.  Depending on the relationship of the agencies, the initial discussions need to be handled by the board chair, executive director and any staff or board member that has prior relationships with the target agency.  If the initial conversations of a possible collaboration yield positive results, it is imperative to enter into a letter of intent or another form of a contract that spells out the intentions of the agencies, confidentiality of the discussions, exclusive dealing and an opportunity for either party to end the discussion for any reason.  It can also be beneficial and it is recommended to utilize a mediator that will facilitate and guide the discussions in an organized and productive manner.  Depending on the nature and scope of the discussions, there are several agencies and large benefactors that will donate for some or all of the costs of a mediator.

Once the discussions are set in place and clear objectives are outlined, the focus needs to center on the benefits for the agencies and key decision makers need to keep an open mind and understand that not all of their wish list items will be met. Typically, this is the step in the process where discussions can, and at times will, fall apart but it is important to rely on the mediator and ensure that the overall objectives are being addressed and positive dialogue is continued.  Once a mutual agreement is in place, it is crucial that appropriate communication of the merger is made to all stakeholders of the agencies such as staff, donors, granting agencies and clients.  The median of the communication is also an important aspect of how it will be perceived by the stakeholders.  For example, staff at the respective agencies would not appreciate first hearing of the news via  social media and large benefactors might want to receive a personal phone call from the executive director or chair of the board.

The process of a merger and acquisition is not an easy venture and will require strong leadership and clear communication from the board and executive director.  It is also important to keep in mind that the ultimate goal is to ensure and maintain a lasting agency that will continue to grow and prosper within the toughest of circumstances.  This is the fiduciary responsibility of every board member.

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