Reflect on the reasons for considering a merger
Working with another organisation can facilitate access to complementary knowledge, assets and funding, and open up new avenues to develop skills and relationships. It can help build your organisation’s reputation. It can be the catalyst for service innovation and improve the way you use resources. Under the right circumstances, the coming together of two or more organisations can deliver better outcomes for service-users and the community.
However, merging is often a complex and lengthy process. The work can be intense and demanding of time. Building relationships requires a significant investment of time and effort.
Carefully consider what you are seeking before making any commitments to a process that may result in significant upheaval. Be aware that the benefits of a merger usually take some time to be realised, and administrative savings in the short term will likely be offset by integration costs.
Merger discussions often emerge in response to changing external circumstances. For example, in recent times, government funders in particular have indicated their preference to award funding to fewer, but larger service providers. In response, smaller organisations contemplating their long term financial sustainability have considered joining larger organisations with sufficient scale to attract ongoing funding. Sometimes there are real efficiencies in integrating programs run by smaller organisations with similar programs run by large organisations. Additionally, a merger may be a strategic choice to maintain competitiveness when a large for-profit or not-for-profit organisation enters your market.
There are, of course, a range of strategic responses other than merger – described in later sections – to changing external circumstances. However a merger may be the right decision for your organisation if:
- You must increase your scale to compete effectively in your service delivery market(s) – other providers are successful because there are operational and service delivery advantages in being large. In order to compete, you too must increase in size, perhaps through merger.
- Alternative ways of working together will not deliver the desired degree of integration with another organisation – many mergers begin as low intensity collaborations, before building up to more intense forms of working together. If significant resources are necessary to achieve the required degree of integration, consider whether merger is a more appropriate option.
- Other organisations that complement your set of services or clients – in time, other organisations that deliver services in new and innovative ways may threaten your unique value proposition. The opportunity to join with others may be the best way to retain your (collective) competitive advantage.
Please feel free to leave questions or comments on this part of the merger toolkit.