There has been a lot written and spoken about mergers and amalgamations in the NFP sector in recent years. Indeed it has been all but impossible to go to an industry conference and pick up a publication that doesn’t have a presentation, comment or story about the “urge to merge”.
In some cases, government has encouraged or facilitated mergers between particular not-for-profit service providers or amongst providers engaged in discreet areas of service delivery, such as disability employment providers and homelessness services.
The factors behind this push are well known:
- Competition amongst not-for-profits for government funding and philanthropic money;
- Competition with commercial providers; most notably in the aged care & disability sectors;
- Scarcity of appropriately trained and committed workers; and
- Government indifference to the history of community providers and obsession with positive headlines and pure financial return on tax payer money.
It is a given that many NFPs need to change their business models to confront these challenges and it must be acknowledged that a lot of organisations have done valuable and innovative work in developing and adapting in the face of this change. Sadly, however, many smaller organisations, particularly those in regional areas have felt they had no option but to find a larger organisation to merge with.
Each one of those amalgamations results in some degree of loss to the community and there are inevitably winners and losers in any amalgamation or merger. Even for the ‘winner’, the surviving organisation; the true costs are not easily identified or quantified. There are the obvious up-front costs associated with due diligence investigations, amalgamation agreements and transactional costs but there are also costs that typically surface after the fact such as:
- HR time and resources spent trying to mesh together two very different workplaces including the impact on that elusive commodity that is ‘culture’;
- The complications associated with melding together different IT and finance systems;
- Payout or termination fees for service contracts to avoid duplication from multiple service providers;
- Termination payments for staff that don’t want to join the new amalgamated entity or who refuse to (or can’t) change and have to be ‘moved on’;
- The opportunity costs associated with having senior members of management distracted from core business by being involved in ensuring the amalgamation proceeds and is then successful; and
- The resources required to ensure that clients, staff and stakeholders are supported through the transition phase so that the business remains intact.
An alternative vision is that the key to success for NFPs in all sectors is increased collaboration. Regardless of their purpose or the services they provide; all third sector organisations can benefit from formal and informal collaborations with each other. Collaboration can be the key to survival in the increasingly competitive environment in which NFPs must operate.
Rather than concede to the pressures and find a merger/amalgamation partner before it’s too late, or to struggle on until there is no option but to close the doors, it is far better to build on what the organisation has achieved by finding ways to enhance the achievements by collaborating with others. Those others might have a common purpose and provide the same services enabling them to create scale and build strength or they might have a purpose and services that are complementary allowing them to create opportunities for innovation and growth.
Such collaborations may ultimately lead to mergers or amalgamations but they can enable that to occur in a more controlled, satisfying and successful environment. Looking for collaborative opportunities can also enable organisations to maintain control of their own destiny and not be pushed into mergers or amalgamations because of a sudden unanticipated loss of funding or loss of key personnel.
There are six keys to successful collaborations:
- Being clear about the reasons for seeking a collaborative arrangement;
- Identifying partners who share or complement your purpose and vision;
- Engaging in a well thought out process for establishing relationships, communication strategies and agreement on key objectives;
- Following an objective and transparent due diligence process to minimise risks;
- Establishing a governance framework for the collaboration;
- Clearly enunciating and documenting the agreement about what the collaborators will do together and what they will do for each other.
These arrangements can create a resilient group of organisations that achieve far more together than they could ever do operating alone.
One example of how such collaborations can work is the NIACC Alliance; a group of community-based home and aged care providers that, through a facilitated process have developed an alliance and created a special purpose vehicle that will enable them to leverage their shared expertise and resources. The NIACC Alliance members range from an aged care provider with 18 residents to a provider that has multiple facilities and home care services as well as a retirement village. The Alliance is well on the way to securing the future of all members through cost savings on supplies, administration and governance support and plans for shared services.
The NIACC Alliance demonstrates how even the smallest organisation can take control of its own destiny by finding ways to collaborate with others to create a stronger future for themselves, their staff and most importantly, the people they serve – their purpose.