SECTION: PLANNING

20309125A Should we consider merging with another organisation? - A Merger Evaluation Checklist

Published: 03.09.2012 |
Last Updated: 03.12.2013
Diarmaid
Diarmaid
Diarmaid Ó Corrbuí

Diarmaid is Chief Executive Officer of Carmichael Centre for Voluntary Groups.

The consideration and assessment of potential mergers and strategic alliances should be on strategic radar of every board and chief executive. Not-for-profit organisations are under increasing pressure to seriously explore merging with other organisations to strengthen their capacity, eliminate real or perceived duplication and ensure their long-term survival. This pressure is coming from a variety of sources – from funders, from government, from the public and from organisations themselves. A survey by Russell Brennan Keane of the Charity & Not-for-Profit Sector found that almost 70% of charities surveyed felt that consolidation in the sector was inevitable and 76% expect that consolidation will be perceived as beneficial in the public’s eyes .   
Entering into a merger process is a major step for any organisation. There are many success stories, where mergers have worked well and have brought greater delivery and financial capacity and wider and deeper reach for the merged organisations. However, there are also many examples of poorly executed and damaging mergers that have left everyone, beneficiaries, members and staff worse off. Therefore, it is of vital importance that before you formally engage in merger discussions, that the board and management go through the following evaluation checklist.

1. Mission & strategy
Will this merger/alliance be compatible with our mission and strategy?
• Will we still be able to deliver on our mission and achieve of key strategic objectives or will it require an adjustment or dilution of our mission?
• Is a merger the best strategic option?
• Are there better or more feasible alternatives to an outright merger? For example, collaboration, joint working, a strategic alliance or an outsourcing /shared services arrangement.

2. Addresses a key service or functional gap
Will it enable us address a key service provision or functional gap?

3. Tangible benefits
Will it deliver clear and tangible benefits? For example will it:
• Enable us provide a broader range of services to our beneficiaries?
• Create synergies and enhanced services?
• Deliver a greater impact for our clients – for example joined-up and integrated services?
• Bring a much greater breadth and depth of skills and expertise to our clients?
• Strengthen our funding position and relationships with key funders?
• Increase our geographic reach and enable us to provide services in places we are not currently in and that are in urgent need of our services?
• Enhance awareness of what we do, our image and public standing?
• Enable us to achieve significant efficiencies and cost savings?
• Involve limited or no duplication or overlap or if there is, is there a clear and agreed plan to tackle and eliminate duplication?
• Leveragability – will the combined organisations be able to deliver a greater range and level of services than currently being provided by the individual organisations? 

4. Values
Will our core values and beliefs be protected and sustained in the new entity?

5. Cultural fit
Is there a good cultural and working style fit between the two organisations?

6. Future leadership and governance
Is there agreement and a high degree of comfort with the proposed future leadership and governance of the new entity?

7. Gut-feel
Does this proposition feel right?
• Is it the correct thing to do and will it result in enhanced services for our clients?

8. Critical success factors
Are we comfortable that the critical success factors necessary for a successful merger process are in place? The critical success factors are:

  Trust: Is there sufficient trust and good faith between both parties at board and management levels?
• Openness: Is there a genuine commitment to conduct the process in an open and frank manner?
• Positive attitude: Are both parties engaging in the process in a positive frame of mind?
• Support:  Are we clear about the level of support and resources needed and can we provide the necessary support and resources that will be required by the merger process? Do we have or do we need to bring in people with the necessary experience and skills to successfully manage and execute the merger process?
• Commitment: Are both parties committed to making the merger a success?
• Mutual benefit: Is there sufficient clearly defined and quantified mutual benefit for both parties?
If the majority of your responses to the evaluation questions above are negative or unclear, then it is highly probable that the merger process is going to be unsuccessful or that the timing or potential merger partner is not right for your organisation. However, if after going through this evaluation checklist and the majority, if not all of your responses are positive, then you have a strong basis for engaging in a formal merger process. But this is only the preliminary stage and there is a lot of planning and due diligence work to be gone through if the merger process is to deliver a successful outcome. The work involved and the key considerations to be borne in mind, is the subject of a separate article – “The core components and key steps in a merger process”
 
 

My Top Tips
Top Tips
1
Be open to the idea of a merger with a suitable organisation and constantly scan for potential merger candidates.
2
Be clear about why you want to merge and the benefits it will bring.
3
Be rigorous and honest in your evaluation before entering into formal merger discussions.
4
Make sure that the merger critical success factors are addressed and are in place.
5
Be realistic amount the time and resources that will be required
Suggested reading
1
Making mergers work, UK Charities Commission, September 2009
2
Collaborative working and mergers, UK Charities Commission, November 2009
3
Merger – A model for Collaborative Working, Collaborative Working Unit, National Council for Voluntary Organisations UK, March 2006
4
Should you Collaborate? Key Questions Collaborative Working Unit, National Council for Voluntary Organisations UK
5
Mergers: A Legal Good Practice Guide, Jean Warburton, Charity Law Unit, The University of Liverpool, January 2001
References
References
1
Russell Brennan Keane; Charity & Not-for-Profit Sector; Survey Results 2012, A Russell Brennan Keane commissioned survey – conducted by Millward Brown Lansdowne
SECTION 1: PLANNING

20309125A Should we consider merging with another organisation? - A Merger Evaluation Checklist

Published: 03.09.2012 |
Last Updated: 03.12.2013
Diarmaid
Diarmaid
Diarmaid Ó Corrbuí

Diarmaid is Chief Executive Officer of Carmichael Centre for Voluntary Groups.

My Top Tips
My Top Tips
My Top Tips
1
Be open to the idea of a merger with a suitable organisation and constantly scan for potential merger candidates.
2
Be clear about why you want to merge and the benefits it will bring.
3
Be rigorous and honest in your evaluation before entering into formal merger discussions.
4
Make sure that the merger critical success factors are addressed and are in place.
5
Be realistic amount the time and resources that will be required
Suggested reading
Suggested Reading
Suggested Reading
1
Making mergers work, UK Charities Commission, September 2009
2
Collaborative working and mergers, UK Charities Commission, November 2009
3
Merger – A model for Collaborative Working, Collaborative Working Unit, National Council for Voluntary Organisations UK, March 2006
4
Should you Collaborate? Key Questions Collaborative Working Unit, National Council for Voluntary Organisations UK
5
Mergers: A Legal Good Practice Guide, Jean Warburton, Charity Law Unit, The University of Liverpool, January 2001

The consideration and assessment of potential mergers and strategic alliances should be on strategic radar of every board and chief executive. Not-for-profit organisations are under increasing pressure to seriously explore merging with other organisations to strengthen their capacity, eliminate real or perceived duplication and ensure their long-term survival. This pressure is coming from a variety of sources – from funders, from government, from the public and from organisations themselves. A survey by Russell Brennan Keane of the Charity & Not-for-Profit Sector found that almost 70% of charities surveyed felt that consolidation in the sector was inevitable and 76% expect that consolidation will be perceived as beneficial in the public’s eyes .   
Entering into a merger process is a major step for any organisation. There are many success stories, where mergers have worked well and have brought greater delivery and financial capacity and wider and deeper reach for the merged organisations. However, there are also many examples of poorly executed and damaging mergers that have left everyone, beneficiaries, members and staff worse off. Therefore, it is of vital importance that before you formally engage in merger discussions, that the board and management go through the following evaluation checklist.

1. Mission & strategy
Will this merger/alliance be compatible with our mission and strategy?
• Will we still be able to deliver on our mission and achieve of key strategic objectives or will it require an adjustment or dilution of our mission?
• Is a merger the best strategic option?
• Are there better or more feasible alternatives to an outright merger? For example, collaboration, joint working, a strategic alliance or an outsourcing /shared services arrangement.

2. Addresses a key service or functional gap
Will it enable us address a key service provision or functional gap?

3. Tangible benefits
Will it deliver clear and tangible benefits? For example will it:
• Enable us provide a broader range of services to our beneficiaries?
• Create synergies and enhanced services?
• Deliver a greater impact for our clients – for example joined-up and integrated services?
• Bring a much greater breadth and depth of skills and expertise to our clients?
• Strengthen our funding position and relationships with key funders?
• Increase our geographic reach and enable us to provide services in places we are not currently in and that are in urgent need of our services?
• Enhance awareness of what we do, our image and public standing?
• Enable us to achieve significant efficiencies and cost savings?
• Involve limited or no duplication or overlap or if there is, is there a clear and agreed plan to tackle and eliminate duplication?
• Leveragability – will the combined organisations be able to deliver a greater range and level of services than currently being provided by the individual organisations? 

4. Values
Will our core values and beliefs be protected and sustained in the new entity?

5. Cultural fit
Is there a good cultural and working style fit between the two organisations?

6. Future leadership and governance
Is there agreement and a high degree of comfort with the proposed future leadership and governance of the new entity?

7. Gut-feel
Does this proposition feel right?
• Is it the correct thing to do and will it result in enhanced services for our clients?

8. Critical success factors
Are we comfortable that the critical success factors necessary for a successful merger process are in place? The critical success factors are:

  Trust: Is there sufficient trust and good faith between both parties at board and management levels?
• Openness: Is there a genuine commitment to conduct the process in an open and frank manner?
• Positive attitude: Are both parties engaging in the process in a positive frame of mind?
• Support:  Are we clear about the level of support and resources needed and can we provide the necessary support and resources that will be required by the merger process? Do we have or do we need to bring in people with the necessary experience and skills to successfully manage and execute the merger process?
• Commitment: Are both parties committed to making the merger a success?
• Mutual benefit: Is there sufficient clearly defined and quantified mutual benefit for both parties?
If the majority of your responses to the evaluation questions above are negative or unclear, then it is highly probable that the merger process is going to be unsuccessful or that the timing or potential merger partner is not right for your organisation. However, if after going through this evaluation checklist and the majority, if not all of your responses are positive, then you have a strong basis for engaging in a formal merger process. But this is only the preliminary stage and there is a lot of planning and due diligence work to be gone through if the merger process is to deliver a successful outcome. The work involved and the key considerations to be borne in mind, is the subject of a separate article – “The core components and key steps in a merger process”
 
 

References
References
References
1
Russell Brennan Keane; Charity & Not-for-Profit Sector; Survey Results 2012, A Russell Brennan Keane commissioned survey – conducted by Millward Brown Lansdowne