How Nonprofit Boards Can Start the Merger Conversation

Ample data supports the need for nonprofit boards to consider inorganic growth—through mergers, acquisitions, and other strategic alliances—as they look to scale their organization’s impact on, say, college access, climate change mitigation, or obesity prevention. But figuring out how to start that conversation can be tricky, because it requires giving up control to advance the mission. 

A recent BoardSource survey found that close to two-thirds of boards are open to considering mergers. Meanwhile, The Bridgespan Group study “Making Sense of Nonprofit Collaborations” shows that across a spectrum of formal approaches to collaborations, more nonprofit leaders reported success in the most tightly integrated forms—such as asset transfers, subsidiary relationships, and full-fledged acquisitions—than in looser joint programming and associations.

A collaborative project, The Power of Possibility, between BoardSource, The Bridgespan Group, La Piana Consulting, Propel Nonprofits, The Lodestar Foundation, Lyda Hill, and The Patterson Foundation, has zeroed in on six ripe moments in a mission-led organization’s business cycle to consider such alliances, with supporting case studies and how-to checklists to start the conversation. (View a webinar discussing these approaches here.) 

Consider the example of Boston Scores, an after-school youth development program that was looking for its next phase of local growth, as it increasingly served as an innovation hub for its national network, America SCORES. Founded to empower under-resourced youth through a “whole child” model that blends soccer (for a healthy body), poetry (for a broad mind), and service learning (for an engaged soul), Boston Scores had transformed its middle-school soccer program through a 2008 merger with CityKicks that doubled its capacity while adding programming for middle-school girls. Integrating CityKicks allowed Scores to expand the scope of its soccer program, while encouraging its coach-mentors to focus on issues affecting each gender separately. Scores subsequently deepened its soccer and service-learning programs by licensing proven curricula from, respectively, the US Soccer Foundation and One Hen, Inc., a social entrepreneurship program that helps kids build businesses and give back to their communities. 

By spring 2015, the America SCORES network, operating in 12 cities across North America and serving 10,000 students, began to expand its service learning more broadly into middle school, while the Boston Scores leadership began more broadly to consider mergers and other strategic partnerships.

Boston SCORES’s collaboration history had transected at least two of the six most important moments to create a strategic alliance or restructure (see chart below). For one, it used the CityKicks merger to adapt to change, with the growth of girls’ interest in soccer. For another, it concluded as part of strategy and planning discussions that licensing proven curriculum was a fast and reliable route to building and strengthening programs. Now the Boston Scores board faced a third moment: a challenge to innovate and scale its service learning, first locally from K-12 in Boston schools, then across the national network of America SCORES affiliates. 

Strategy and planning, shifts in operating environment, and leadership transitions are moments when boards are wise to reflect on the opportunity of strategic alliances and restructuring.

Three subway stops from Boston Scores headquarters in Jamaica Plain, I (Katie) was participating in a board meeting for One Hen, which I cofounded in 2009. At that June 2016 meeting, our board faced a fourth inflection point on the chart: leadership transition. In fact it was our third executive director (ED) transition in seven years, reading us squarely into another body of Bridgespan research that finds senior staff at small nonprofits seek outside opportunities to advance their careers on average every couple years. While we took heart in being part of the talent development pipeline for the sector, we were getting tired of operating as a search firm. So we flipped the lens: Instead of acquiring a new ED, we sought an experienced, long-standing ED, whom we knew and valued, to acquire us. 

We approached the EDs of two longtime licensors of our curriculum and began discussions. Because Boston Scores had kept mergers on their board radar, that conversation sped forward. For Scores, the One Hen program implementation had been a solid success. Scores saw value in taking control of the ongoing development of the One Hen curriculum as a foundation for innovating service learning. Initially Boston Scores and One Hen envisioned a merger, but soon shifted to a less time-intense deal structure: asset transfer, whereby Boston Scores quickly acquired One Hen’s intellectual property, donor lists, and staff (a ten-week deal from start of talks to finish), all in time for a fall gala and the academic year. Meanwhile, One Hen would own any liabilities and had time to wind down its 501(c)3. It worked.

To date, the combined entities have chalked up gains across fundraising, staff careers, program innovation and reach, as well as lessons learned. Sponsors did migrate with One Hen’s program transfer. Funding grew more than expense, and two funders that specialize in supporting the cost of collaborations, the Lodestar Foundation and The Catalyst Fund, covered the added expense of integrating people and systems. Meanwhile, the combined entity opened up new opportunities for legacy Scores and One Hen staff, and new relationships with mission-aligned foundations. Today, half of America’s SCORES affiliates across the United States are piloting One Hen, with roll out to all expected by 2020. 

The lessons for boards: Think about your mission and the goal you want to achieve vs. deal structure, and keep taking the temperature of staff involved. One Hen lost its program director in the transition, which ultimately opened up opportunity for a Boston Scores staffer, but for a time set back the pace of innovation. Above all, keep an eye on moments ripe for mergers and alliances so that you don’t miss the next leap of growth and impact.

Read more stories by Anne Wallestad & Katie Smith Milway.