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Tips and Answers
to Your Questions
Deciding to Restructure
What are the disadvantages of mergers?
In order to understand some of the potential disadvantages of mergers,
it may be helpful to look first at what typically motivates a nonprofit
to consider such an option, and the potential benefits of doing so.
Based on our experience, nonprofits consider mergers for reasons that
fall generally into the following three categories:
- To improve finances
- To gain access to a larger skill set
- To enhance the organization's pursuit of mission
The specific and real benefits of merger that support the above factors
include:
- Improved ability to deliver services
- The creation of a continuum of services under unified control
- Better market positioning
- A larger market share
- A higher public profile
- Increased political influence
- More strategic fundraising
- A larger staff, allowing greater specialization of functions and
the provision of more service
- Improved economies of scale
The potential disadvantages of pursuing a merger may stem from pursuing
it for the wrong reasons - motivations that fall outside of the above
categories. For example, a merger that is driven primarily by a funder
and without true organizational commitment is less likely to succeed
and reap the desired benefits. Similarly, a merger that hinges on the
desires of only a few people in the organization(s), without a clear
assessment of the motivations and potential benefits, is also unlikely
to be successful.
Mergers that happen without the identification of specific desired
outcomes and strategies to achieve them are more likely to fail and
not reach their potential. In the meantime, much time and money will
have been spent on the process. In such cases, it may have been more
advantageous to remain as separate entities.
Mergers in which there is not enough attention paid to the integration
of the cultures of the merging organizations can also present serious
difficulties. This can result in the development of resistance, and
even sabotage, within the merging organizations. Not only can such
challenges impede the ability of the merged organization to achieve
its mission, they can, in extreme circumstances, tarnish the reputation
of the organization in the community. Successful mergers are dependent
on well-planned and well-executed cultural integration.
It is up to the board and staff leadership of the merging entities
to assess the motivations behind and potential benefits of the merger,
identify desired outcomes and strategies, make informed decisions to
move forward, and then work diligently to make the merger a successful
reality.
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