Mission + Strategy = Social Value

Nonprofits Merge to Grow Efficiently

Over the holidays, several articles hit my "in box" about nonprofit mergers. Year-end is a big time to finish up mergers in order to to start up the combined organization in the new fiscal year. One of the more interesting mergers I read about was between Renaissance Entrepreneurship Center ($2.2M/year, 16 staff) and Start Up ($350,000/year, 3 staff), both in the Bay Area.  An article about the merger appeared in the Silicon Valley/San Jose Business Journal on Dec. 24th and explained that the purpose of the merger, as we have seen in other articles in this space, was to take advantage of the each organization's geographic placement in the market. "This is a way for Renaissance to provide programs on the Peninsula without reinventing ourselves," said Sharon Miller, CEO of Renaissance and the person who will be the CEO of the merged organization.

According to Miller, the two organizations together will serve expanded populations and geography, and though they will be eliminating some overhead costs no staff will be laid off as a result of the merger at this point in time. Total expenses for the merger ran to $250,000 which will be covered through grants from the Silicon Valley Community Foundation and the Omidyar Network. This is an example of what I think of as efficient growth: why write a lot of grants and take years to build up your geographic foot-print when there is a potential partner in the very market where you would like to expand your services that you could merge with, instead? If the potential partner has similar mission, programs, delivery mechanism, outcomes, and financing method, why wouldn't you consider a merger?

Mergers Are Better for Growth than Economic Gain

One of the best ways to learn about nonprofit mergers is to read about other people's experiences. One very thoughtful piece I have recently read is called From Corner Cafe to Corporation: The Inspiration Corporation Merger Experience,  which highlights the benefits of a merger as a strategy for growth. The paper was published by Inspiration Corporation, a Chicago-based nonprofit dedicated to ending homelessness through supportive services, employment and training, and housing programs. Inspiration Corporation completed two mergers with two separate Chicago nonprofits: The Employment Project and The Living Room Cafe. The paper, written by Chris Persons, the former Executive Director of Inspiration Corporation, is an in-depth piece (get ready, with attachments it's 56 pages), which describes the motivations for each merger and the process that they went through to complete each one. Inspiration Cafe, the original nonprofit prior to the mergers, grew to become Inspiration Corporation, a citywide nonprofit about twice their original budget and program size. Thus far, Inspiration Corporation feels that they have benefited from the mergers, primarily through the geographic and program expansion the combined mergers created for their organization. The current executive director, John Pfeiffer is firm in his belief that mergers rarely produce significant capital for nonprofit growth or dramatic organizational efficiencies. As John states, "I've seen how mergers can promote the strategic reconfiguration of program offerings - weeding out under performing and overlapping programs, for example - but apart from offering incremental gains in efficiency, and fuller and more marketable program arrays, I'm not optimistic that mergers can deliver significant unrestricted resources for most human service organizations." Capitalizing Inspiration Cafe was not the primary motivator for their seeking the mergers in the first place. Instead, Inspiration Cafe wanted to grow and expand its services to their clientèle which they definitely achieved. Inspiration Corporation, at the conclusion of their paper, states that the organization is not done with its merger activity; they will seek other merger opportunities that meet with their mission and strategy.