Underwriting Merger Strategy Funder Requests

The 2016 Report from the Metropolitan Chicago Nonprofit Merger Research Project shared the feedback that nonprofit leaders are confused about how foundations feel about merger strategies, whether they should be sharing the news of their merger explorations with their foundation partners, and how to face the significant fears that they have, in general, of informing their donors about merger explorations. This is in large part because few foundations have stated funding objectives around merger or other restructuring strategies in their communication.

Recommendations

Here are four recommendations that could help improve funder transparency around merger strategies and improve communication between foundations and grantees on this topic:

1. Do Your Homework

Do your homework, and learn about merger strategies. A wealth of information exists regarding every aspect of nonprofit mergers. The following links might prove particularly useful to foundations. (For a complete bibliography on the topic of nonprofit mergers, go here.)

Haider, Donald, et al. Mergers as a Strategy for Success: 2016 Report from the Metropolitan Chicago Nonprofit Merger Research Project.
This study covers 25 diverse nonprofit mergers that were completed and four which did not complete, which occurred between the years 2004–2014. The study includes five in-depth case studies, analyzes critical issues in merger negotiations and ten keys to merger success, and makes recommendations to merger participants.

MacIntosh, John. "Nonprofit M&A is No Oxymoron." New York: SeaChange Capital Partners, 2011.
This article summarizes two years of grantmaking experience for a fund whose purpose is to support nonprofit collaborations and mergers.

Leipsitz, Margaret. Two Years of Nurturing Nonprofit Collaborations: An Interim Assessment. Boston: Catalyst Fund for Nonprofits, 2013.
This report evaluates the decisions of the Catalyst Fund, a donor collaborative to underwrite nonprofit collaborations and mergers.

2. Create a Policy for Funding Mergers

Create a policy around funding nonprofit mergers for your foundation. This policy could address such questions as the following:

• Will you fund merger strategies at all, and if so, under what circumstances?
• Will you only fund your own grantees, or will you accept proposals from any nonprofit?
• Will you only fund the first phase of the merger process or any and all phases of the process?
• Is there a dollar limit in terms of the grant?
• If both parties are current grantees, what will be your policy regarding continuation funding after they are consolidated? Will you –
• Fund at the combined level without restrictions?
• Fund at the combined level, but only for a transition period?
• Fund only at one of the gift levels and then drop the other gift as soon as the organizations are consolidated?
• Prefer to make a decision on a case-by-case basis?
• How will you communicate that you fund mergers?
• What will be your reporting process?

3. Share Merger Policy Broadly

When you do develop the merger policy, it’s important to share it as broadly as possible: on your website, in your foundation materials, on social media, in grantee meetings, etc., on an ongoing basis.

4. Normalize Merger Strategy

Whether you are discussing strategic, succession, or annual planning, the more program officers can normalize merger strategy by bringing it up with grantees as a possibility, the easier it will be for everyone to have these conversations when and if the time comes to do so.