<\/p>\n
Merging two nonprofits can make a lot of sense, but it isn\u2019t always easy. Experts told the Chronicle<\/em> to keep these things in mind.<\/p>\n Always be on the lookout<\/strong>. Nonprofit leaders should regularly consider whether they would have more impact if they combined with another organization. This is especially true if finances are starting to look a bit shaky, said nonprofit attorney Jerald Jacobs.<\/p>\n Have a list of nonnegotiables<\/strong>. Both organizations in a merger should have a list of things\u00a0 \u2014 certain leadership positions, locations served, or targeted beneficiaries \u2014 that can\u2019t be touched.<\/p>\n This will cost money.<\/strong> A few funds exist to help pay for attorneys, branding experts, and financial analysis. Otherwise, those costs will be borne by the combined assets of the new organization.<\/p>\n Manage egos.<\/strong> In any merger one nonprofit is usually on firmer ground and is running the show. Be attuned to the fact that the stronger organization may have to make some concessions to allow the other nonprofit to save face, Jacobs said.<\/p>\n Look for how each organization complements the other. <\/strong>If you have big technology needs, a nonprofit with recent tech investments may be a good fit. Or if your nonprofit focuses on state-level advocacy, a partner with federal experience could make a good combination.<\/p>\n Keep your eyes on the mission. <\/strong>Above all, make sure that the people or cause you want to help will benefit from a combined organization.<\/p>\n <\/div>\n <\/div>\n<\/div>\n\n\n \u201cSome people receive it as a criticism or as a suggestion that they’re somehow underperforming, and that is very much not the intention,\u201d said Brandenburg, who manages a portfolio of grants for organizations that are working to promote impact investing.<\/p>\n\n\n\n Unlike in the for-profit world, where getting acquired is often a sought-after exit strategy that enriches company shareholders, there is a stigma around mergers for many nonprofits, she said.<\/p>\n\n\n\n Brandenburg\u2019s interest in nonprofit mergers helped fuel the creation of the $1 million Collaboration Fund, a joint project with the MacArthur Foundation to help nonprofits defray the sometimes hefty costs associated with mergers. Consolidation can be a sensible choice, Brandenburg said, because the field of potential grantees has grown in the two decades since she became interested in impact investing, but the pool of available philanthropic funds has remained stagnant.<\/p>\n\n\n\n While the fund is limited to a small portion of the broader nonprofit field, Brandenburg and other advocates of mergers hope it and similar efforts can spur consolidation across the board. Fewer charities \u2014 there are more than 1.9 million nonprofits and foundations in the United States \u2014 would mean less competition for donations and grants. That competition has become more intense over the past year as many charities that depend on federal support have seen those grants cut or reduced.<\/p>\n\n\n\n Groups also merge for other reasons. Sometimes they see ways their work can complement one another. Or a CEO is considering retirement. The former leaders of the Patient Advocate Foundation and the PAN Foundation, which recently merged, say that gaining efficiencies on back-end processes like Medicare billing and streamlining fundraising costs were some of the key motivators for their merger. <\/p>\n\n\n\n \u201cIt costs a lot of money to raise a dollar,\u201d that can be directed to help patients, Alan Balch, former CEO of the Patient Advocate Foundation, said. \u201cAnd if you\u2019re not combining forces to do that, you\u2019re competing with each other.\u201d<\/p>\n\n\n\n While merging can save money in the long run, it can have high upfront costs. Last year Ford assisted the merger of the Capitals Coalition and the International Foundation for Valuing Impacts with a $400,000 grant, and that still didn\u2019t pay for all of the trainers, finance pros, branding consultants, and lawyers involved. <\/p>\n\n\n\n Beyond costs, perhaps the biggest complication, nonprofit experts say, is ego.<\/p>\n\n\n\n \u201cOrganizations are skeptical of one another,\u201d said Jerald Jacobs, a lawyer and author of The Legal Guide to Nonprofit Mergers & Joint Ventures<\/em>. \u201cBoards are tribal, especially when they’re both in the same field.\u201d<\/p>\n\n\n\n There isn\u2019t current data on nonprofit merger activity, but Jacobs said business is on the uptick. And a study by the Center for Effective Philanthropy last year found that nearly half of nonprofits worried they would have to close or merge because of fundraising difficulties.<\/p>\n\n\n\n But simply contemplating a merger is a lot different than putting one into action. Merger conversations can be especially difficult at the board level because a combined organization often means some of the trustees will lose their positions. Board members can be recalcitrant, Jacobs said, especially if they have risen through the ranks at state affiliates of the organization or have volunteered for it for a long time.<\/p>\n\n\n\n \u201cIf you’re asked to vote to approve a combination where half the board gets fired, that’s often a hard sell,\u201d he said. \u201cYou need to massage the egos of those who have invested in the organization and its mission.\u201d<\/p>\n\n\n\n While a few of the nonprofit leaders Ford\u2019s Brandenburg approached bristled at the idea of merging, others saw it differently.<\/p>\n\n\n\n \u201cAmong some grantees, there’s an element of relief to just open up the possibility that they don’t need to keep all the plates spinning on their own in what is objectively a very challenging funding environment,\u201d she said.<\/p>\n\n\n\n The key to navigating a successful merger, according to nonprofit experts, is to maintain a focus on the missions of the two organizations, rather than the feelings of the top executives or the board.<\/p>\n\n\n\n That\u2019s what Balch, former CEO of the Patient Advocate Foundation, and Kevin Hagan, former president of the PAN Foundation, say they have done. They merged under the name Patient Advocate Foundation, where Balch will be executive chairman of the board starting in July and Hagan will serve as CEO.<\/p>\n\n\n\n Patient advocacy nonprofits like theirs help people with co-pays and transportation to treatment, and push for policies to help patients. They often have to navigate a complex \u2014 and costly \u2014 payment compliance process, Balch said. <\/p>\n\n\n\n The deal went smoothly, Hagan said, because both executive teams and boards focused on impact. The combined organization now covers patients with complications from more than 130 diseases and provides a higher level of individual case management services.<\/p>\n\n\n\n Hagan said he and Balch tried to set the tone early in the discussions that benefits to patients would drive the talks. <\/p>\n\n\n\n \u201cWe’re doing this for the patients,\u201d he said. \u201cIt’s not about either organization, it’s not about either CEO, and it’s not about either executive team.\u201d<\/p>\n\n\n\n Like the top executives in the patient advocacy merger, the leaders of two suicide prevention nonprofits whose merger is pending approval from the New York attorney general\u2019s office say their pairing came because the two groups complemented each other, not because either organization\u2019s financial house was on fire.<\/p>\n\n\n\n Pending the approval of the merger, the organization will be known as the American Foundation for Suicide Prevention\/The Jed Foundation for 18 months while new names are considered. Bob Gebbia, the AFSP\u2019s president, had previously announced plans to retire in 2027, and John MacPhee, JED\u2019s CEO, will lead the combined organization.<\/p>\n\n\n\n Both leaders had a clear view of what each organization could and could not do. The AFSP\u2019s 73 chapter organizations were responsible for a large part of the organization\u2019s $45 million in revenue in 2024. Gebbia says the 57,000 members of those chapters can \u201cmobilize instantly\u201d to push for policies related to suicide in every state capital in the country.<\/p>\n\n\n\n JED, on the other hand, receives a larger share of its revenue from big individual donors and institutional philanthropies. While the AFSP\u2019s focus is on advocacy and research about suicide from childhood into old age, JED\u2019s focus is on children and young adults. JED provides technical support for training programs at schools, community organizations, and municipalities.<\/p>\n\n\n\n Because neither nonprofit was in financial distress, the two groups could take their time. Last May Gebbia and MacPhee met for Italian food in Manhattan, where Gebbia discussed his planned retirement and floated the idea of a new organization led by MacPhee. Soon afterward, a small group \u2014 the CEOs, board chairs, immediate past board chairs, and chairs of each nonprofit\u2019s governance finance committee \u2014 met at the Crosby Street Hotel for an initial discussion.<\/p>\n\n\n\n The small, informal get-togethers were necessary, MacPhee said, to allow leaders to get to know one another and articulate at the outset a clear list of things that might scuttle the merger.<\/p>\n\n\n\n The nonnegotiables, Gebbia said, included his desire that the new nonprofit would not serve only young people as JED does. He also insisted that it would continue to include a focus on scientific research and that its chapter structure would be incorporated into the new organization. JED was firm on the point that MacPhee pilot the new nonprofit.<\/p>\n\n\n\n With those principles agreed on, the two sides conducted due diligence on each other and ran revenue models that showed to their satisfaction that the combined group could increase revenue without cannibalizing fundraising efforts.<\/p>\n\n\n\n Time will tell if the deal will help the two organizations\u2019 shared mission of reducing suicide. Both leaders think it will.<\/p>\n\n\n\n \u201cWe felt that a larger organization could be a little bit more of a center of gravity for the field, and that it could raise awareness and raise the profile of the issue,\u201d MacPhee said.<\/p>\n\n\n\n But taking time to thoughtfully complete a merger isn\u2019t always possible. Many times deals are sought when the bottom is about to fall out and a charity\u2019s leaders are looking for any help they can get, said Frank Williamson, founder of Oaklyn Consulting, a Chattanooga investment bank that specializes in nonprofit mergers and joint ventures.<\/p>\n\n\n\n That\u2019s why nonprofit leaders should keep aware of opportunities to merge and regularly assess whether it is a good option, he said. It can be hard, he said, but nonprofits have a duty to ask whether they can be effective in pursuing their missions if they retain their current legal entity, or if a combination makes more sense.<\/p>\n\n\n\n Foundations should ask a similar question, Williamson said. <\/p>\n\n\n\n \u201cDonors should consider whether merger activity is a good investment,” he said. \u201cIs it a better use of money than having it sitting around earning interest until the next grant?\u201d<\/p>\n\n\n\n Ford\u2019s Brandenburg thinks that in some cases, foundation assets can better help nonprofits if they support mergers that result in more sustainable organizations. <\/p>\n\n\n\n The newly launched Collaborative Fund, focused on impact investing nonprofits, is a test, she said.. She hopes it sparks a larger conversation among her colleagues at Ford and throughout philanthropy about how foundation money can help nonprofits of all types that are struggling. <\/p>\n\n\n\n <\/p>\n","protected":false},"excerpt":{"rendered":" If done right, mergers can strengthen finances and boost impact. But there are costs, and egos, to navigate.<\/p>\n","protected":false},"author":365113,"featured_media":4402231486392,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":true,"content-type":"","cop_editorial_slug":"News-Daniels-Mergers-0426","cop_asana_id":"1214125624006220","editorial_asana_id":"","editorial_doc_id":"","footnotes":""},"categories":[81925],"issue":[],"profile":[],"role":[191049],"series":[],"topic":[192233],"coauthors":[189896],"class_list":{"0":"post-4402231484473","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","6":"hentry","7":"category-news","8":"role-leading","9":"topic-executive-leadership","11":"has-featured-image"},"acf":[],"yoast_head":"\nPaying for Mergers and Managing Egos<\/h2>\n\n\n\n
Putting the Mission First<\/h2>\n\n\n\n
Nonnegotiables<\/h2>\n\n\n\n
The American Foundation for Suicide Prevention was flush, with nearly $94 million in assets, including $64 million in publicly traded stock. Revenue for the JED Foundation has increased steadily over the past four years, thanks in part to two gifts from mega-philanthropist MacKenzie Scott totaling $55 million. <\/p>\n\n\n\nKeep an Eye Out for Merger Opportunities<\/h2>\n\n\n\n