How To Collaborate Before A Merger

Nonprofit mergers don't just happen overnight. It's a long process that has many ups and downs and complications. In order for everything to happen smoothly, there needs to be constant communication between the parties.

This is the advice of Thomas A. McLaughlin in his book "Nonprofit Mergers and Alliances, Second Edition." He wrote that organizations must keep each other in the loop when discussing the possibility of a merger. This should begin by agreeing in advance -- verbally and in writing -- that no major decisions will be made without prior notice.

What other topics should be discussed during merger collaborations? McLaughlin suggested the following topics:

• Board of directors’ role or composition changes.
• Changes in accreditation status.
• Changes in major leases.
• Changes in office or program site space.
• Collective bargaining status.
• Insurance coverage lapses.
• Major asset acquisition or disposal plans.
• Major media attention planned or anticipated.
• Major new positions being added.
• Management changes of any material kind.
• New programs or services.
• Planned borrowing activity.
• Plans to submit proposals/new revenues received.
• Possible or actual litigation.
• Public processes anticipated (e.g., license renewals)/
• Significant budget variances.
• Unmet tax liabilities.

Bay Citizen Close To Merger With Nonprofit News Group

The Bay Citizen, a San Francisco, Ca.-based news organization, has announced plans to merge with Berkley's Center for Investigative Reporting (CIR), a nonprofit investigative news group.

The agreement between the two news groups has been rumored for weeks, but The San Francisco Chronicle reported that The Bay Citizen officially announced the plan on their website Tuesday.  Under the agreement, CIR would run the day-to-day operations of The Bay Citizen within 30 days.  The merger is pending approval from both organizations' boards.

If the merger does go through as planned, former San Francisco Chronicle Executive Editor and Hearst Editor at Large Phil Bronstein will become executive chairman of the combined groups.  Bronstein is currently the chairman of CIR's board of directors and was the first choice of The Bay Citizen's late founder Warren Hellman.  It was also confirmed that Robert Rosenthal would remain CIR's executive director, and would also direct the editorial operations of the combined organization.

Plans for a merger had been in the works for quite sometime, but started to gain steam recently.  Just last month, Bronstein made a presentation to the board of The Bay Citizen, in which he outlined the advantages of a merger between the two groups.  He told them that they would be able to use each other's strengths by forming one group, and he identified economies of at least $1 million in operating expenseses.

You can read the full story on this potential merger in The San Francisco Chronicle.

Challenges In A Merger

For all the benefits of a potential nonprofit merger, it brings along as many risks and challenges.  How will existing departments function under the new management?  What will be the fate of current employees?  How will the merger be announced to the public?  These are all questions that can cause lots of headaches for nonprofit managements.  It's enough to make you reconsider going through with the merger.  Luckily, there's help on the horizon.

During the 2011 Risk Management and Finance Summit for Nonprofits, Eileen Morgan Johnson of Whiteford, Taylor & Preston LLP discussed the risks of nonprofit mergers and separations.  The NonProfit Times was in attendance for their tips, which included the following:

• Periodically review governing documents.
• If a potential conflict can't be avoided, make sure it is disclosed.
• Don't be afraid to request a legal opinion when the issue warrants it.
• Seek the advice of independent experts.
• Insist on thorough documentation. This includes board minutes showing discussion and reports, memoranda and other documents considered in decision making.
• Keep your employees informed of all new merger developments and provide ample opportunity for their feedback.  Nobody likes being kept in the dark.
• Make sure that your fellow directors get copies of all proposed agreements or summaries.
• Demand that board minutes accurately reflect votes.

Want to read the rest of the tips?  Read the full article over at The NonProfit Times.

Crisis Presents Opportunity For Nonprofits

The economic crisis has presented a unique opportunity, at least according to a columnist from The San Francisco Chronicle.  C.W. Nevius wrote in a column on Saturday that the city of San Francisco must encourage nonprofits it supports to either close or merge with another agency.  The city spends about $500 million a year funding local agencies, many of which provide shelter for the homeless, job training, and violence prevention. 

Although Nevius acknowledges these are worthy causes, he says that there is too much overlap among nonprofits in San Francisco.  For example, there are 10 agencies providing the exact same services as Homeless Employment Collaborative, which gives job training to the unemployed.  Money could be saved by simply having similar organizations merge together.  While it might seem difficult to get many of these nonprofits to accept such a proposal, Nevius reminds readers that it has been done before.  In 1967, Haight Ashbury Free Clinic (HAFC), which was on the verge of closing because of financial difficulties, merged with Walden House after a gentle nudge by the city.  Walden helpef HAFC get out of debt and gave them a medical presence.

San Francisco has been pushing these types of mergers for three years now, though not much has become of it as of yet.  You can read the full SF Chronicle piece over at their website.

Merger News: ClearPoint JoinsWith New York-Based Nonprofit

ClearPoint Credit Counseling Solutions, a nonprofit based in Richmond, Virginia, has announced plans to merge with Consumer Credit Counseling Service of Central New York.  However, it may take months before the deal is official because the merger need approval from regulatory agencies.  As part of the deal, Consumer Cedit Counseling Service will tak the name of the Richmond nonpofit, and the combined headquarters of the two organizations will stay in Virgnia.  In addition, a ClearPoint spokesman said that all of Consumer Credit Counseling's positions will "transition into reigonal positions," though employees are not expected to see many changes at this point.

This is certainly not the first time ClearPoint has been involved in a merger. Two years ago, it merged with ByDesign Financial Services, a Los Angeles-based nonprofit organization, in April of 2009.  In addition, when the current merger is completed, ClearPoint will have expanded its services into a 12th state. 

Want to read more about this merger?  Head on over to The Richmond Times-Dispatch.