For many nonprofit organizations, the topic of a merger or acquisition (M&A) comes up as a reaction to difficult circumstances, such as financial woes or succession issues. However, some successful nonprofit organizations see M&A activity as a strategic tool to proactively strengthen the organization. It can be an opportunity to become more effective, identify best practices in the delivery of services, expand services and constituencies, and enhance the use of resources. The best time to consider M&A is when stressful circumstances are not driving the process.
A board that is contemplating the merits of M&A activity has many things to consider. But first, it should think about the organization’s mission and strategic plan, and determine whether M&A is an effective option compared with alternatives. If a decision is made to go forward, many factors will be considered. Does the target offer services that fit with current offerings? Are the geographies served compatible? Would the activity enhance the organization’s brand? Will the cultures of the organizations align? Does the plan make good business and financial sense? Would the transaction create new risks, and if so, how will they be managed?
There is tremendous potential and challenge in M&A activity. Addressing the opportunities proactively will be difficult and time-consuming, but may result is a strong strategic organization.