Finalise a merger agreement
At this point in the merger process the records of discussions of the negotiation group are crucial. The merger agreement will bring together all the different threads of the negotiation in a single document. It will also set out the transfer of assets where relevant. Unless they have sufficient internal expertise, most NFPs will require legal advice to draft a formal merger agreement.
You and your Board (through the negotiation group) will have agreed in principle to the terms of the merger.
Begin drawing up a formal merger agreement by reviewing the minutes of the negotiation group’s meetings, and collecting each of the decisions. Add a preface outlining the purpose of the merger, and explaining the alignment of each organisation’s vision and mission. Submit a draft version to the board well before it meets to endorse the merger agreement. This allows time for board members to review the document thoroughly, and provide input into each iteration.
Discussion of implementation plans or future strategy should be limited to an implementation schedule and changeover date – while future strategy is important, these decisions are separate to the merger agreement and are better left to the integration phase.
At each organisation’s board meeting, it is often useful for representatives from each organisations should to present the proposed agreement to each Board together. Following the presentation and any questions from board members, the other organisation’s representative should leave to allow the give the board an opportunity to raise concerns discuss the agreement privately. If discussion becomes fixated on one issue, remind Board members of the reasons for the merger, and the identified benefits. If the board’s concerns cannot be addressed in the moment, do not feel pressure to resolve the issue on the spot. Agree on what the issue is and take the concern back to the other organisation to continue negotiation.
If the board agrees to the merger, the next step is to indicate their intent, rather than to make legally binding commitments. Board members should vote on a motion such as:
‘The Executive director is directed to engage legal counsel in order to cause a merger between our corporation and [other organisation]’
Both boards should hold meetings to consider the final agreement around the same time. If possible, schedule the more reluctant board to meet first to avoid the awkward situation of one organisation agreeing to a merger with no partner. Following the agreement, both board chairs should stay in close contact to ensure both boards are aware of any issues raised by the other during the next stage of the merger.
Please feel free to leave questions or comments on this part of the merger toolkit.