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Nonprofit Merger Checklist: The Ten Steps

street sign for a vehicle mergerNonprofit Merger Checklist: The Ten Steps

The Ten Nonprofit Merger Steps

Here is a checklist of merger steps for your nonprofit. Yes, the list is long, but merging like marriage is a process best done carefully.

“A successful merger is carefully planned, soberly decided, and requires close and continuous consultation with all who harbor reservations toward the union.”
Ron Reed, President, Family Service of Greater Saint Paul and East Communities Family Center

1. Discover if a Merger Makes Sense for Your Nonprofit

Understand merger as a potential option
Identify the benefits of a merger for your nonprofit
Learn about mergers, the common challenges, and success essentials, like the role of trust and change management. See this article.
Find strong merger partners. See How to Evaluate Your Nonprofit Partnerships: A Tool.
Identify potential benefits for your best merger partner(s)

2. Take Baby Steps with Your Merger Partner and Your Key Stakeholders

Share your merger interest with your potential partner, i.e., both executive directors and board chairs meet
Confidentially share the concept of a possible merger with other key stakeholders, like community leaders, advisory committees,  key donors, and your board members (as appropriate)

3. Create Tentative Understandings with Your Merger Partner

For each party, what is required? What is wanted? Why are they considering a merger?
What is the vision? How will we measure success and benefits?
Determine the structure of the merged organization- You have options here. One survives? New Organization? Other? 
Governance, identify the proposed board structure of the merged nonprofit
Merger costs
Review existing obligations, i.e., to members, vendors, and funders
Discuss headquarters? Mailing location? Banking?
Establish a timeline
Other issues. Your list here depends on the unique needs of each partner
Evaluate the opportunity and, as appropriate, draft a case for merging

4. Obtain Official Board Input and Approval to Study Merging

In this step, each organization presents information about their nonprofit to the other board of directors
Each board passes a resolution to explore merger
Boards approve individuals to be on a Joint Committee to Study the Merger

5. Begin Official Public Study Period

The Joint Committee undertakes the following work
Identify potential names for the post-merger organization
Legal reviews of both organizations
Financial Reviews of the nonprofits, including any outstanding liens and lawsuits. Check out this powerpoint, for an extensive list of what to examine in your due diligence. (Thanks to CEO Fran Pheeny for this resource.)
Fine-tune your common understandings, including the case for the merger as needed
Learn how each nonprofit’s board operates and make decisions. Explore how the “board of the future” will operate.
Review the by-laws, articles of incorporation, and IRS determination letters to determine that current organizations’ requirements will be met
Insurance Policies, i.e., Directors’ or Officers’ Insurance. Check with your agents to ensure it will remain in place during the process.
Check if both groups are current with their IRS and state filing requirements?
Work with the public, membership, donors, common donors, and other stakeholders to gather their thoughts, concerns, and ideas and consider them as part of the proposed merger
Other depends on the unique needs of partners
Joint Committee agrees on documents and seeks boards approval on the common understandings, the case, and their other work.

6. Seek the Boards Approval to Continue to Work Towards the Merger

Either separately or jointly, the Boards meet to review the Joint Committee’s work. They approve the common understanding, the case, etc. Both agree to create a Plan of Merger that includes a due diligence checklist.

7. Develop a Plan of Merger Document 

The Joint Committee and staff of the merging organizations develop a merger document plan based on their discovered information.

8. Obtain Final Board Approval to Merge

Each Board approves The Plan of Merger
The Boards create a Merger Transition Team

9. Merge 

Complete final due diligence checklist
File legal paperwork

10. Implement Your Post-Merger Plans

The Merger Transition Team develops or oversees the implementation plan, including

The strategic plan
Fund development plan
Operation budget
Program priorities
Communication plan
Marketing plan
Board integration/training
Financial- transfer assets, close accounts, integrate accounting systems
Technology- how the websites and databases, etc., will be integrated
Insurance-confirm coverage is obtained, maintained, and is appropriate
Records.  Determining how will records be kept and organized?
Timeline
Continued learning about change management and building trust.
Other, unique needs of partners

Additional Resources

See Five Steps to Take Before Your  Nonprofit Mergers Read How to Evaluate Your Nonprofit Partnerships: A Tool

and Karen’s Ten Concepts On How to Save Nonprofit Programs.

Most important, check out Karen’s Nonprofit CEO Library, a collection of resources for nonprofit CEOs and executive directors to answer your questions about nonprofit leadership issues.

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* This document was created as part of a project with the Nonprofit Resource Center of Sarasota. It was adapted from several sources, including the useful resource, Merge Minnesota.

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Author
Karen Eber Davis

Karen Eber Davis Consulting guides executive directors and CEOs to generate the resources, boards, and support they need to make remarkable progress on their missions. As the award-winning thought-leader, advisor, and founding principal of Karen Eber Davis Consulting, Karen helps nonprofit leaders get answers, generate revenue, and grow their mission. Davis is known for her innovation and practicality based on her work with or visits to over 1,000 nonprofit organizations and her experience leading board and team events. She is the author of 7 Nonprofit Income Streams and Let's Raise Nonprofit Millions Together.

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