Merger 101
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2/4/2014
Agenda
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Definition of merger
“Mergers” in everyday life
Organizational mergers
Why merge?
High-level merger steps
Retaining the best of both companies
Importance of change management
Role of leaders
Definition of Merger
• To merge: to cause (two or more things, such as two
companies) to come together and become one thing; to
join or unite (one thing) with another; to change into or
become part of something else in a very gradual way
• Merger: The act or process of combining two or more
businesses into one business
• Merger in the nonprofit world: a “marriage” of two
organizations and two Boards
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“Merger” in Everyday Life
Merging during daily commute
• What does it take for a
smooth merge?
• When do you run into
problems merging?
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Marriage and Organizational Mergers
Marriage
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Casual Dating
Friendship
Engagement
Wedding
Honeymoon
For ever after
Organizational Merger
Looking for merger partners
Letter of Interest and due diligence
Letter of Intent
Merger close
Initial integration phase
The important work begins
Why Are We Looking at a Potential Merger?
• Create a continuum of services under unified control,
highlighting expansion of geographic spread
• Decrease fragmentation of services for consumers
• Able to serve more clients in a holistic manner
• Larger market share to compete in new marketplaces
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• Need size to move into Healthcare arena
Better marketing position
Higher public profile
Greater political influence
More strategic fundraising
Greater economies of scale
High-Level Merger Steps
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• Letter of Interest
• Due diligence – quiet, but a lot of work behind the scenes
(Dec – March)
• Board approval to move forward – Letter of Intent (2nd Qtr)
• Planning for the future and communications plan
• Merger close - time to celebrate (on or before July 1, 2014)
• Change legal structure and name
• Implement merged leadership and Board structure
• Agree on and work towards a common culture
• Combine financial reporting (3rd qtr 2014)
• Evaluate operations and systems for opportunities (4th qtr)
• Implementation of opportunities (starting in 2015)
• Ongoing: CHANGE MANAGEMENT
Letter of Interest
• Establishes the mutual commitment to pursue merger
exploration
• Indicates that the other party is a serious merger partner
• Sets a timetable for exploratory conversations
• Both parties agree to good-faith efforts to work with the
other on those explorations
• Includes a commitment to hold off on pursuing merger
discussions with other organizations
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Due Diligence
• A time period of review, with a fixed end date
• Appears quiet, but lots of activities behind the scene
• Handled by a small core team of leaders – merger task
force
• Purpose: to determine if there are any “show stoppers” or
concerns that would prevent the two parties from merging
• Involves exchange of vital documents
• May involve external auditors and lawyers to review
financial and legal documents
• Due diligence team for each organization will scrutinize
documents and follow up on any questions or concerns
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Letter of Intent
• After the due diligence ends, each team presents their
findings and recommendations to their Board
• The Board will evaluate all aspects around the proposed
merger
• If the Board members determine that a merger is in the
best interest of the two organizations, they will draft and
sign a Letter of Intent to merge.
• The Letter of Intent will include a timeline for a proposed
close of the merger
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Merger Planning
• Involves planning for the future
• Corporate structure
• Board structure
• Management structure
• Brand structure
• A joint team will develop a communications plan
• Staff
• Clients
• Donors
• Federal, state, local authorities
• Financial pro forma statements
• What will the financials look like for the merged entity?
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Merger Close – Time to Celebrate
• The Boards vote to approve the merger
• Implement changes in legal form
• Signing of the merger agreement
• Changes to charters, bylaws, and third-party contracts
• Unveiling of new brand, letterhead, etc.
• Important: Timing of announcement between the two
organizations
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New Leadership and Governance Structure
• Leadership structure can vary based on specifics of the two
merged entities
• Chief Executive Officer (CEO)
• Chief Financial Officer (CFO)
• Chief Operating Officer (COO)
• New Board structure
• Blend of Board members from the legacy organizations
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Blending of Cultures
• Cultures may appear similar on the surface
• But values and customs may be very different
• What stories are important in your organization’s
history?
• What values are important to your organization?
• Who are our heroes?
• What are your most cherished customs?
• Try to define and document your culture before the
merger
• Agree on most cherished values and customs you want to
retain in the new organization
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Implement Integration Plan
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Establish combined financial reporting
Connect program teams and share expertise
Explore opportunities to leverage expertise across teams
Explore future expansion opportunities
Integrate administrative teams - specialization
Integrate systems to facilitate tracking and reporting
Enhance operations
• Develop common policies and procedures
• Share and implement best practices
Retaining the Best of Both Organizations
• Integrate Whole-Person, Whole-System health and
wellness throughout the organization
• Expanded opportunities for lateral and upward
movement
• Enhanced positive culture for staff and clients
• Greater collaboration and communication
• Brand name recognition
• Pride in who we are and our common future
• Strong IT systems and EHR foundation
• Quality assurance and quality improvement
• Efficient administration and operations
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• Specialization
Importance of Change Management
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Importance of Change Management
• Change cycle (feelings, thoughts, behavior):
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Loss – fear, caution, paralysis
Doubt – resentful, skeptical, resistant
Discomfort – anxious, confused, unproductive
Discovery – anticipating, creative, energized
Understanding – confident, pragmatic, productive
Integration – satisfied, focused, generous
• Each person will go through each stage at their own
pace
• Work with your team to help them get “unstuck” in any
of these stages
• Communicate, communicate, communicate!!!
Role of Leaders
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Be a positive role model
Stay informed to ensure one consistent message
Understand and feel comfortable with the message
Communicate openly, share information with your team
Address staff questions openly and honestly
Address rumors and gossip right away
Work with your staff through concerns and emotions
Support an environment of openness
Support each other, be mindful and kind
Recognize that you may feel a wide range of emotions as
you go through this change and seek support