Make first contact

Opinions differ about the best way to initiate a conversation with a potential partner about a merger. A ‘scattergun’ approach is the preferred tactic of some, signalling to the sector you are willing and ready to entertain any merger proposition (this is typically a strategy for larger NFPs). Others suggest a more circumspect style (particularly smaller NFPs), balancing the need for discretion in the early stages of a merger, with the requisite level of honesty and transparency to build mutual trust.

One way to quickly scan for organisations you are already connected with is through LinkedIn. Ask staff to create a list of first and second connections with staff from potential merger partners. See Search for a merger partner for more detail.

A lot of other organisations under the $5m operating budget, their CEOs were doing exactly what I was doing [seeking merger opportunities] to see whether merging would result in a sustainable model.
— Not-for-profit organisation that has undergone a merger

Our advice is to be cautious and thorough in your approach to potential merger prospects.

When you first contact a potential merger partner, make clear that any initial conversation is exploratory. It is important at this point to engage in a way that conveys both enthusiasm about possible shared interests, but also that you are not wedded to any particular course of action. Flexibility and interest from the outset will foster positive, productive relationships, and reduce (possible) suspicions on the part of the other organisation that you have an ulterior motive. 

It is about initiating, and if you’ve got a good enough relationship with the CEO, it’s not a sensitive thing; it’s an exploration thing.
— Not-for-profit organisation that has undergone a merger

Use language such as ‘shared interests’ and ‘ways to collaborate and work more closely’ to broach the subject of a merger. And recognise that some organisations may prefer to discuss less intense forms of cooperation in the first instance (see Understand options for working with others). Keep these sensitivities front of mind when making first contact, and be prepared to discuss a range of ways of working together.

Confirm that your conversation is confidential until you have the opportunity to broach the subject directly with both boards. Where possible, seek strong direction from your Board about the issues they are concerned about, or which they would like you to raise with a potential merger partner.

At the start, the Board decided on what the next steps were going to be. The board had said to me, “There are five options for what we can do.” The first one really was looking at a shared service. The second one was to look to more private organisations to potentially merge with. The third was a merge with another charitable organisation. The fourth option was to scale down more, and the fifth option was to close down. Those were the five options.
— Not-for-profit CEO

Prioritise forming a good personal relationship with members of the other organisation at the first meeting. While the content of the conversation is important, it is just as important that both parties leave the meeting enthused about working together. This first discussion may not necessarily be entirely frank, as both parties wait to understand more about the potential opportunity before sharing more openly. This is entirely rational for both parties in early discussions, but will need to change quickly as negotiations progress. At this stage, the purpose of the interaction is to establish whether there is broad compatibility between the two organisations.

After the first meeting, decide on immediate next steps, which will likely include testing some of the ideas / opportunities raised with trusted board members and senior staff members. Agree upon the time and location for the next meeting, which at this early stage should be informal. The meeting should take place at a neutral location to avoid the impression one organisation is driving the process independently of the other. 

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