Magazine article Children's Voice

Mergers and Acquisitions in Nonprofit Agencies

Magazine article Children's Voice

Mergers and Acquisitions in Nonprofit Agencies

Article excerpt

For three years, Alex Morales, President and CEO of the Children's Bureau of Southern California in Los Angeles, has been exploring opportunities for mergers and acquisitions. "We haven't found anything yet," he reports.

Morales's observation is that, in the nonprofit world, the factors that motivate mergers and acquisitions are more rare than in the for-profit world. Three years ago, Children's Bureau's board authorized Morales to explore merger and acquisition options. Despite the agency's interest, it still hasn't identified any viable opportunities.

"Most organizations that are interested in mergers or acquisitions are those that may be driven by desperation [for] their survival," Morales explains. "The problem is that you end up dealing with organizations that are in weakened conditions." Strong organizations rarely want to consider the option.

"The biggest hurdle begins and ends at the executive director level," he says. For-profits tend to be driven by their boards and their for-profit interests. But, according to Morales, the driving force for non-profits is the personal concern of executive directors over their own futures.

"The first question posed by executive directors is not, 'What will this do for our organization?' but rather, 'What will this do to my career?' In most cases, they don't want to have to consider the options of retiring, stepping down a position, or leaving the organization."

Even in the few instances when Morales has found a strong organization with an executive director who was willing to consider a merger, the organizations' cultures were so different that such a move would have been too difficult. "I heard a presentation from one executive who was involved in three or four mergers, and two of them ended up fracturing after a short time," he says.

When Mergers are Successful

Despite the challenges Children's Bureau is facing, many agencies have succeeded in working through mergers and acquisitions, and the results have made the efforts worthwhile.

Five years ago, a small agency called the Parent Connection approached Arizona's Children Association (ACA). That merger "added primary prevention services to our agency, which we didn't have at the time," explains ACA Senior Vice President and Chief Operating Officer Dee Ann Barber.

ACA Board Chair Nancy Stanley recalls the Parent Connection merger. "I was a board member of the Parent Connection at the time. We were a primary prevention parent education organization in Tucson and were having problems staying afloat as third-party funding was drying up." Although it served thousands of children, ACA didn't have a strong prevention component-its efforts were focused primarily on early intervention.

As a small agency with an annual budget of less than $500,000, Parent Connection was concerned about coming into ACA, with its $25 million annual budget. Would its identity become muddied? Would philosophical differences with ACA impair its mission? What would happen to the intimate, family environment among its employees? "We were fortunate in that ACA didn't gobble us up," Stanley recalls. "Rather, they celebrated our mission."

ACA continues this philosophy today as it considers new merger opportunities. "We look for agencies with strong profiles and well-defined missions," Barber explains. "We have a strong interest in allowing them to continue to operate fairly autonomously." They keep their names, their staffs, and their buildings. "They're well-known in their communities, and they're also known by those names by individuals and groups that donate to them," Barber explains. Structurally, they're identified as divisions of ACA rather than as separate programs. "Their senior managers participate as equals on our management team with our other managers."

More recently, ACA has begun a merger with Las Familias, a small, struggling treatment agency for sexually abused children, and has been contacted by Golden Gate Community Center in Phoenix, which also seems like it might be a good match. …

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