Strategic Mergers

Here is another look at merging nonprofits, following up on yesterday’s post about nonprofits merging primarily for economic reasons.

This article from the Stanford Social Innovation Review examines mergers done for strategic reasons and concerns organizations in Arizona.

An excerpt.

“In strategic mergers, organizations consciously choose to acquire certain nonprofits which add a specific type of value to their mission, program portfolio, and/or economies of scale. Rather than raise all the capital, grow the competencies, and build the capability to add new programs themselves which can take a long time (and may be virtually impossible in this market), organizations are seeking to partner or even merge with organizations that have the specific skill set, the proper government contracts, and appropriate licensing to go support their services. This can be done in a shorter timeframe with a merger.

“I have been particularly taken with one example of a strategic merger model that Bridgespan wrote about in their wonderful piece of research: M&A: Not Just A Tool for Hard Times, published in February, 2009. The Arizona Children’s Association (AzCa) was highlighted as an example of a strategic merger in the Bridgespan article. AzCa grew from $4.5M annual budget in 1999, to a $40M annual budget through six strategic mergers. But AzCa’s merger strategy was not driven by finances; instead it grew out their desire to expand services to the youth and families they were serving.

“I was curious how the rest of the mergers proceeded, so I called Fred Chaffee, the Pres/CEO of AzCa to ask him more:

“Mission + Strategy: Could you list the chronological order of the mergers you did?
Fred Chaffee: The first one was in 1999, in Tucson, called Parent Connection. It works with evidence-based family life education, children 0-6 years of age. Their budget at the time was between $300 -$ 400,000.

“Our second merger was in 2000, Child Haven, based in Prescott, Arizona, a child crisis center. We helped start this agency about 8 years before; their budget was $200,000 when we merged.

“Our third merger in 2002 was with Las Familias, in Tucson, with a budget of $1.5M.

Their mission was to provide services for victims of sexual abuse, both children and adults who had been victimized as children.

“Our fourth merger was in 2004, with Golden Gate Community Center in Phoenix with a budget of $1.8M. It is a 70-year old settlement house in a working class Hispanic neighborhood. It is a great community center.

“Our fifth merger was in 2006, with New Directions Institute for Infant Brain Development, with a budget of $600,000. New Directions translates the neuro science of brain development into a curriculum to train people to deliver.

“Our sixth merger was in 2008, the Southern Arizona Center Against Sexual Assault, with a budget of $2M. This organization focuses on the prevention of violence against women. “