This white paper will discuss the range of collaborative opportunities available to today’s nonprofit organizations in the area of mergers, acquisitions, strategic alliances and shared services.  We will review the pros and cons of each option and share insights from nonprofit leaders who have embarked on the path of either merger, alliance, or even simply shared services.

Define the Terms: merger, strategic alliance/joint venture and shared services

Leaders of nonprofit organizations of the 21st century have to juggle newly emerging obstacles, as well as challenges that are centuries old. To do this well, and to ensure the sustainability of the organization, many will have to consider the possibilities of realigning resources; collaborating to increase efficiencies; and entering into a formal strategic alliance or merger with other nonprofit(s) to ensure their legacy survives.

In order to make the case for one nonprofit to collaborate with another, whether it be through a legally binding merger or a loose alliance (or anything in between), it is important for the leadership to have a clear understanding of the parameters that define the collective effort. So let’s begin this white paper with some key definitions. The reality is that for both the corporate and nonprofit environments, the definition of terms, such as merger and acquisition, strategic alliance/joint venture and shared services, are defined consistently as follows:

Merger and acquisition: A merger in the nonprofit world is not much different than a merger in the corporate world. This means that in a merger situation, one entity legally becomes part of the surviving entity and effectively disappears as two or more separate organizations integrate, or combine, into one. This is termed an acquisition when one entity dissolves and transfers select assets to the acquiring nonprofit. As the word ‘acquisition’ implies, in this transaction, one nonprofit acquires or gains possession of the assets and resources (perhaps even the name/brand) of another nonprofit.

Note that under a consolidation, which is a little different than a basic merger, an entirely new entity is created as both predecessor entities dissolve and transfer their assets as they merge into a newly established entity.

Strategic alliance/joint venture: When overlapping programs exist between two organizations, the organizations may choose to work together with the expectation of greater overall success, as a result of their collaboration, than each might experience when working independently. A strategic alliance is any collaboration or informal “partnership” that nonprofits enter into, often intentionally designed to leverage the strengths of each party to achieve a common goal.

A joint venture operates in much the same way as a strategic alliance, but is often called on for a short, well-defined period of time. Two organizations may cohost a walk-a-thon, gala or some other mutually beneficial fundraiser or they may offer a program for clients together, each bringing their own area of expertise to the event. The venture may be a one-time-only program or the partners may continue to plan joint ventures periodically over time as opportunities arise.

Shared services: This is most often described as the collaborative use of resources across traditional, organizational boundaries.  Multiple organizations, or multiple programs within a larger nonprofit organization, establish shared services to make mutual use of equipment, staff, program resources, database support and other technology needs, space and more, in an efficient and cost effective manner. Given the financial challenges facing nonprofits today, for many the best way to face these pressures is through the adoption of cost-cutting methods. Thus, two organizations (or more) may work together in one office or in a suite of offices and might, for example, share personnel (including administrative staff, HR professionals, marketing support or bookkeeping, conference rooms, office equipment) or supplies with others, but they would each retain their own distinctive name, brand and legal identity throughout.

Armed with this information and clear concept of the various collaborative scenarios that are available, the leadership of the nonprofit organization can move forward with a deliberate and premeditated plan for adopting the option that is most beneficial for their own organization, given its current unique position in the community and future changes that are anticipated.

To download a PDF of the complete White Paper, click here