Nonprofit Merger Checklist: The Ten Steps
December 13, 2020

Nonprofit Merger Checklist: The Ten Steps

The Ten Nonprofit Merger Steps

Merging nonprofits is a complex but potentially powerful strategic decision that can strengthen impact, expand resources, and increase sustainability. A successful merger requires careful preparation, trust-building, and clear communication like a well-planned marriage.

“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

This checklist outlines ten essential steps to guide your nonprofit through a thoughtful, strategic merger process.

1. Assess Whether a Merger Aligns with Your Strategic Goals

Understand merger as a potential strategic option
Identify the benefits and risks 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

Initiate confidential conversations with your potential partner, i.e., both executive directors and board chairs meet
Secure early buy-in of a possible merger with other key stakeholders, like community leaders, advisory committees,  key donors, and your board members (as appropriate)

3. Develop a Preliminary Framework for the Merger

Clarify what each organization needs and wants from the merger.
Define a shared vision and success measures.
Explore different structural options: Will one organization absorb the other, or will a new entity be created? You have options here. One survives? New Organization? Other? 
Outline governance changes, including the future board structure.
Identify potential financial, legal, and operational considerations, including merger costs
Review existing obligations, i.e., to members, vendors, and funders
Discuss headquarters. Mailing location? Banking?
Set a realistic timeline for moving forward. Identify other issues. Your list here depends on the unique needs of each partner
Evaluate the opportunity and, as appropriate, draft a case for merging. Note: This is an excellent place to allow both parties if moving forward still makes sense.

4. Obtain Board Approvals to Formally Explore the Merger

In this step, each organization presents a nonprofit overview to the other board of directors
Each board passes a resolution to explore a merger.
The boards approve individuals to be on a Joint Committee to Study the Merger

5. Begin Official Public Merger Study Period

The Joint Committee tackles the following tasks:
Identify potential names for the post-merger organization
Legal reviews of the 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 common understandings, including the case for the merger 
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 the nonprofits are current with their IRS and state filing requirements.
Work with the public, membership, donors, common donors, and other stakeholders to hear their thoughts, concerns, and ideas. Incorporate what you learn as part of the proposed merger
Other depends on the unique needs of partners
Joint Committee agrees on documents and seeks board approval on the common understandings, the case, and their other work.

6. Secure Board Approval to Proceed with Merger Planning

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 with 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 the final due diligence checklist
File legal paperwork

10. Implement Your Post-Merger Plans

The Merger Transition Team leads the process including:

Strategic planning to align the newly merged organization’s mission and programs
Developing a fund development plan to sustain operations
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

Resources

Five Steps to Take Before Your Nonprofit Mergers

How to Evaluate Your Nonprofit Partnerships: A Tool

Karen’s Nonprofit CEO Library A curated collection of resources for nonprofit executives navigating leadership, strategy, and organizational growth

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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 is a nonprofit strategic planning consultant who works with visionary leaders committed to taking their organizations to new heights. She offers customized strategies, assessments, and coaching designed to help leaders lead their organizations to achieve their potential. She is the author of 7 Nonprofit Income Streams and Let's Raise Nonprofit Millions Together.

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