Mergers, Collaborations, and Partnerships

As nonprofits consider strategies for the future, it is not unusual for a board or staff to explore the possibility of collaborating or partnering with another nonprofit or even a for-profit entity. Your nonprofit may actively seek out collaborations and partnerships or be sought after as a potential partner. Before plunging into a potential collaboration or partnership, it is helpful to be familiar with common pitfalls and challenges. The National Council of Nonprofits has assembled some helpful resources to get you started:

Nonprofits that enter into collaborations or partnerships frequently will draft a written agreement with their collaboration partner. It’s not only prudent to have all the expectations and responsibilities of the parties in writing, but it makes practical sense to memorialize the details of “who’s responsible for what” in the event that the nonprofit employees (or parties on the other side) who negotiated the collaboration move on to other responsibilities. Whether the written document is called a “Memorandum of Understanding” (MOU), or a letter agreement, or something else, it could be legally enforceable so it is wise to have the agreement reviewed by legal counsel. Also -- whenever there are multiple parties involved, the question of legal responsibility for risk can arise. Whose insurance will cover a bad outcome? Especially for nonprofits engaging in joint ventures with for-profit entities: You need to be aware of any potential for "private benefit" - One objective of any partnership should always be to protect the nonprofit’s tax-exempt status and avoid “private benefit” transactions.

• Note: The redesigned Form 990 in Part VI, Section B, line 16 (b) asks whether the nonprofit has adopted a policy requiring the organization to evaluate its participation in joint venture arrangements and taken steps to safeguard the organization’s tax-exempt status.
• Thinking about launching a corporate sponsorship program to engage businesses in support of your nonprofit? Read all about corporate sponsorships.

Articles and Other Resources

• Read the hard facts about mergers in an article by David La Piana from the Stanford Social Innovation Review (2010), that points out that while there is great pressure for nonprofits to merge right now, especially in a tight economy, mergers actually require new money, as well as significant resources of volunteer time for board members and staff time to conduct due diligence.

• The Foundation Center’s Nonprofit Collaboration Resources webpage offers various videos on collaboration and merger topics.

• Read the article, Making Nonprofit Partnerships Effective to learn some reasons why nonprofits collaborate, and challenges that can de-rail successful partnerships. (BoardSource).

• Read case studies featured in Nonprofit Mergers and Acquisitions: More Than a Tool for Tough Times, a report that suggests a proactive strategy when thinking of mergers and acquisitions. (Bridgespan, 2009).

• Nonprofits: Misery Loves Company, by Lawrence Delevingne, suggests how the troubled economy has affected the rate of mergers in the nonprofit sector.

• The Networked Nonprofit, by Wei-Skillern, Jane and Sonia Marciano (Stanford Social Innovation Review, Spring 2008), discusses the benefits and practicalities of collaborating with like-minded groups and of networking among small nonprofits.

• View this video in which the CEO of the American Heart Association’s national office and the CEO of the Singapore Heart Foundation describe the benefits of their international collaboration.

• Learn about the process used by nonprofits in their collaborations and how that process contributes to the benefits and obstacles of collaborating, in Nonprofit Collaboration & Mergers: Finding the Right Fit, a report from a three-year study of nonprofit collaborations in the Greater Milwaukee area (2004).

Books about Collaborations, Mergers and Partnering

• The Power of Partnerships, Principles and practices for creating strategic relationships among nonprofit groups, for-profit organizations and government entities. American Society of Association Executives (2009).

• Nonprofit Mergers Workbook Part I: The Leaders Guide to Considering, Negotiating, and Executing a Merger, by David La Piana, (Fieldstone Alliance, 2008).

• Nonprofit Mergers, The Power of Successful Partnerships, by Dan H. McCormick, Jones and Bartlett (2003).

• Strategic Restructuring for Nonprofit Organizations: Mergers, Integrations, and Alliances, by Amelia Kohm and David La Piana, Praeger Publishers (2003).

• The Collaboration Challenge: How Nonprofits and Businesses Succeed Through Strategic Alliances, by James E. Austin, (Jossey-Bass, 2000).

• Forging Nonprofit Alliances: A Comprehensive Guide to Enhancing Your Mission Through Joint Ventures & Partnerships, by Jane Arsenault, Jossey-Bass (1998).

Tools for Collaborations and Mergers

• Online tools such as BoardBooks, BoardEffect, and GoogleDocs can help facilitate knowledge sharing among partners and allows board members to easily centralize and effectively synchronize relevant information during the due diligence process of partnering. This kind of software can help make collaboration among nonprofit leaders a smoother and much more transparent process.

• MAP for Nonprofits has published a how-to book on nonprofit mergers, called Merge Minnesota: Nonprofit merger as an opportunity for survival and growth. For a free copy, contact Ron Reed, Project Redesign, at (912) 332-7319.