Understand options for working with others
There are many forms of collaboration. The first assessment to make is what is the best means of achieving your objectives to provide quality services to service-users. Mergers are the most resource-intensive form of collaboration compared with other legal structures. Justice Connect’s Not-for-profit Law Information Hub provides useful information on alternative forms of collaboration such as joint ventures, auspicing arrangements and partnerships. Before launching into the merger process, ask: are there other ways to achieve what we would like to without merging? That is, consider the aspiration of any collaboration first, and the legal, financial and structural implications second.
Two mother-child groups run by different not-for-profit organisations, but within the same catchment begin collaborating by meeting at the same park on a regular basis for informal gatherings. Six months later they formalise their arrangement through an MOU, organising activities under joint leadership. Finally, when appropriate, they may wish to merge, combining two organisations in to one.
Figure 1 illustrates the different levels and intensity of cooperation that can occur between organisations working together under different legal structures. At the left hand end, organisations remain quite independent, perhaps cooperating in a limited range of circumstances, and sharing information on an as needs basis. At the other end, at least in one substantive area of their operations, two or more organisations have effectively become one. They have a common mission, joint authority and control, and share risk, resources and benefits. Less intense forms of collaboration may precede a formal merger.
Click on an image below for more details about each of these options. Further details about the legal implications of each option can be found in Justice Connect’s Guide for Working With Other Organisations.
All ways of working together involve an investment in relationships and changes in practices and systems. Once a legally binding instrument is in place the decision is more difficult to reverse. Understand your options so that your board can evaluate them systematically and so you are aware of the benefits and risks of each during negotiation with potential merger partners.
The characteristics of organisations faced with a merger opportunity inform consideration of alternative partnership options. Smaller organisations may view partnerships as a trade-off between how much autonomy they are willing to sacrifice versus the strategic advantages that more intense forms of cooperation can provide. Larger organisations may find lower intensity arrangements easier to enter into, but harder to govern in the long-run.
You need to be clear on what your organisation seeks to achieve through working with other organisations before deciding on the most appropriate legal arrangement. These objectives will also set implied limits on the extent of change you are willing to consider. Figure 2 includes four questions you should ask of yourself and your organisation in deciding the most appropriate option for working with others.
Informal collaboration can provide knowledge, influence and access to specific programs with minimal long-term commitment, but may not result in sufficient integration to meet your objectives. If you seek a greater level of cooperation, but target specific, complementary programs, a joint venture may better serve these goals. Alternatively, if you are looking to remain autonomous, but consolidate back of house operations, this can be achieved through an alliance rather than a full merger.
Please feel free to leave questions or comments on this part of the merger toolkit.