Establish rules for negotiation

Subsequent meetings should confirm both organisations’ intention to explore a merger opportunity (or ways of working) together. A memorandum of understanding (MoU) may be helpful to formalise interactions between each group and govern any exchanges of information. At this early stage, the board is simply authorising negotiations on its behalf rather than delegating responsibility for key decisions. 

Figure 6: Overview of a Memorandum of Understanding (MoU)

Figure 6: Overview of a Memorandum of Understanding (MoU)


The MoU should include some, if not all of the following:

  1. An agreement to keep information received about the other organisation confidential
  2. The structure of the merger (see Understand options for working with others)
  3. Any deadlines related to the merger negotiation
  4. Any rights of access to the other organisation’s information necessary for the due diligence process
  5. An agreement to exclusively negotiate with the other party during the period of the MoU
  6. An acknowledgement that either party can leave merger discussions at any time
  7. The key contact person in each organisation
  8. Payment of shared costs incurred through the process

For more information on MoUs, see Justice Connect's guide to Memoranda of Understanding.

Form a negotiation group

After the commitment to the merger process is confirmed either verbally, or through an MOU; a negotiation group should be formed to conduct the negotiation process on behalf of both organisations. This group should include key decision-makers from both organisations, and in particular, board members that are enthusiastic about the merger opportunity. Seek out board members who are likely to be effective ambassadors for the merger, and who will work well with others.

The purpose of this group is to oversee and manage the negotiation process. Each board delegates authority to representatives on the negotiation group to discussions to progress, but the board members retain ultimate responsibility (collectively) for signing off on the final merger agreement. This helps avoid senior leaders getting caught up in negotiation of low level matters. The group should coordinate activities in the lead up to and during the merger, and communicate to both organisations important decisions along the way. These activities include planning for negotiation, through to agreeing to a MOU and leading due diligence. The negotiation group is an opportunity to bring more staff along the merger journey by socialising the Board’s intentions and building relationships at an administrative level between both organisations. This group does not enter into binding agreements and it should not make public statements.

Keep the numbers as small as possible. If the group is too large, it may be harder to reach agreement and to control the flow of information. If the group is too small however, knowledge of potential business implications may be limited, and it will be more difficult to mobilise support for the merger from internal champions when negotiations conclude. Include in the negotiation only those participants that can actually make decisions, to reduce the extent of ‘back and forth’ between senior leaders and their direct reports. Thorough preparation for these discussions will ensure the negotiation group uses the time as efficiently as possible.

If at any point there is a need for clarity on an urgent matter, bypass the negotiation group and contact the other board directly in writing to prevent confusion. 

Form a communication group

Communicating with stakeholders before a merger requires sensitivity and tact. Clear and consistent information in the early stages helps people interpret for themselves how the merger is relevant to them, and provides important context for their effective participation later in the merger process.

To develop your communication strategy, you need a team of key personnel from both organisations. Depending on the resources available, and the extent to which are both willing to expand the number of people involved, this may be additional to the negotiation group, or a subset. This team should include respected members of staff and the board, preferably with some experience in design and delivery of communications plans.

Identify one person from each of the merging organisations who will be responsible for delivering all communication about the merger. This ensures consistent messaging for staff.

Inform senior staff about negotiations early in the merger process, and of its rationale. The reasons for the merger must be explained honestly and frankly. However, your communication needs to strike a balance between keeping staff informed and not sharing information that has the potential to undermine progress. For example, you may wish to share the fact that a merger is necessary to ensure long term sustainability of your services, but perhaps not which merger partners you are currently in discussions with. Always emphasise that service-users’ best interest is the driving force behind the merger and outline the risks to service-users where fundamental organisational change does not occur.

Communication with staff and external parties begins in the negotiation phase, but continues after integration. More detail is provided on the communication strategy during integration in the Integrate section.

Subsequent meetings 

Subsequent meetings of the negotiation group should cover:

  • How the costs and responsibilities of managing the negotiation process (including covering the cost of due diligence) should be divided
  • The leadership role both organisations take in discussions
  • The tasks and deadlines required for negotiations
  • The major risks for both organisations associated with pursuing a merger and potential mitigation strategies
  • A high level assessment of the impact of a merger on key internal and external stakeholders.

When to bring the Board together

After a number of meetings of the negotiation group, some board members will have already met each other. During the negotiation process, find opportunities for both boards to begin working with one another. Hold a joint Board meeting early to test the shared understanding among board members of what is proposed and what changes will be required. The first combined meeting of the two boards must be well organised, engaging and positive – focusing on the mutual benefits of a potential merger. To this end, both board chairs should organise to meet prior to the combined board meeting to discuss:

  • œ  How the meeting will be run
  • œ  The agenda
  • œ  Any key concerns with the merger that must be discussed in the meeting
  • œ  Key personalities (and their likely positions) on each Board.

If resources permit, there is value in holding the combined Board meeting off-site and/or with an external facilitator to avoid the appearance of one organisation dominating the process.

A number of tasks should be completed for, and by the boards together in this period, which are outlined in Figure 7 below


Figure 7: Pre merger board checklist


Please feel free to leave questions or comments on this part of the merger toolkit.