Before saying “yes” to a Merger or Acquisition (M&A), enter with caution and start to peel back the layers, as you may find some underlying issues with your organization or the organization you are about to join forces with. On May 18, we sat down with industry experts to discuss M&A in nonprofits and learned some key takeaways for when a nonprofit organization is considering M&A, including: fit/assessment, legal contracts, finances, building culture and maintaining your core values and mission through a merger.

The panel advised that if you are approached by an organization considering a merger, it’s crucial to ask yourself “why?”  Is their organization performing poorly?  Does their organization lack substantial donors?  How will my organization benefit from this merger?  You must do your due diligence!  The panel concluded that finance is the most important piece to keep in mind when making this decision.  Having a strong financial advisor involved from the start is key and could easily save you a year of work if an accountant uncovers financial trouble early on.

Below is a list of some of the action items that the panel discussed and believe to be key when deciding whether or not M&A is right for you and your organization:

Ask your donors for advice – They have business experience, they also understand your mission and values and will be grateful you asked them to get involved.

Finances – There may be hidden issues that are not presented up front, such as outstanding loans or contracts and property that may or may not be transferable.  Take notice whether the other organization has accurate and timely financial statements.  Get together as a whole and discuss how each organization handles their payroll and billings processes. You will need to uncover who are employees vs. contractors, benefits, including what you will continue to offer, and which you will add or discontinue if you move forward.

Involve your board members – Your board members should be involved throughout the entirety of this process, give them tasks to help you uncover whether or not M&A is the right move for your organization.  They should do more than just vote “yes” or “no.”

Team culture – Ask yourself, “Who is staying on?” “What do we like about our culture now, what do we not like?” Get your staff involved and ask each of them these following questions.  Once you go ahead, it could take up to three years until you hear “we” vs. “them.”

Involve the staff – Get both teams together and have everyone vote on a new logo, brand colors and other items to get them engaged and have a stake in the process.

Ask why – Ask yourself, “What do they bring to the table that you can’t do on your own?”  This decision has to be fact-based and make sense in the long-run instead of trying to help another organization with a “bail out.”  Your organization must benefit from M&A, and ultimately together you bring greater impact.

Integration plan – You will have to discuss integration costs, so it’s imperative that you have an integration plan on both sides.  Break down which systems and software you will need to implement and how you will merge important data. On average, for smaller organizations, you should plan to spend about $200,000 for system integration.

Fundraise at a greater level – Once you have completed your merger or acquisition, keep in mind that you will have to fundraise at a greater level and not the same as before.  Show your funders the benefit of their larger donation and how its impact will lead to your organizations’ success.

With M&A not being as cut and dried as some may think, it’s imperative to your organization to involve a third party advisor who will help mitigate these obstacles.  Having a knowledgeable expert on your side will bring a great deal of benefit to both parties, as they will ask the right questions, search for hidden issues and help you negotiate the best deal possible.


Download our Nonprofit M&A Financial Checklist.


If you would like more information, please feel free to contact our expert M&A panelists:


Al Fine, Director of Risk Management, G2 Insurance Services


Julie Treppa, Partner, Coblentz Patch Duffy and Bass LLP


Janet Holland, Partner, DZH Phillips


Vance Yoshida, Senior Manager, La Piana Consulting


Debra Marsteller, Executive Director, Project Independence