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Merger 101

Merger 101. 2/4/2014. Agenda. Definition of merger “Mergers” in everyday life Organizational mergers Why merge? High-level merger steps Retaining the best of both companies Importance of change management Role of leaders. Definition of Merger.

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Merger 101

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  1. Merger 101 2/4/2014

  2. Agenda • Definition of merger • “Mergers” in everyday life • Organizational mergers • Why merge? • High-level merger steps • Retaining the best of both companies • Importance of change management • Role of leaders

  3. Definition of Merger • To merge: to cause (two or more things, such as two companies) to come together and become one thing; to join or unite (one thing) with another; to change into or become part of something else in a very gradual way • Merger: The act or process of combining two or more businesses into one business • Merger in the nonprofit world: a “marriage” of two organizations and two Boards

  4. “Merger” in Everyday Life • Merging during daily commute • What does it take for a smooth merge? • When do you run into problems merging?

  5. Marriage and Organizational Mergers • Marriage Organizational Merger • Casual Dating Looking for merger partners • Friendship Letter of Interest and due diligence • Engagement Letter of Intent • Wedding Merger close • Honeymoon Initial integration phase • For ever after The important work begins

  6. Why Are We Looking at a Potential Merger? • Create a continuum of services under unified control, highlighting expansion of geographic spread • Decrease fragmentation of services for consumers • Able to serve more clients in a holistic manner • Larger market share to compete in new marketplaces • Need size to move into Healthcare arena • Better marketing position • Higher public profile • Greater political influence • More strategic fundraising • Greater economies of scale

  7. High-Level Merger Steps • Letter of Interest • Due diligence – quiet, but a lot of work behind the scenes • (Dec – March) • Board approval to move forward – Letter of Intent (2ndQtr) • Planning for the future and communications plan • Merger close - time to celebrate (on or before July 1, 2014) • Change legal structure and name • Implement merged leadership and Board structure • Agree on and work towards a common culture • Combine financial reporting (3rdqtr 2014) • Evaluate operations and systems for opportunities (4thqtr) • Implementation of opportunities (starting in 2015) • Ongoing: CHANGE MANAGEMENT

  8. Letter of Interest • Establishes the mutual commitment to pursue merger exploration • Indicates that the other party is a serious merger partner • Sets a timetable for exploratory conversations • Both parties agree to good-faith efforts to work with the other on those explorations • Includes a commitment to hold off on pursuing merger discussions with other organizations

  9. Due Diligence • A time period of review, with a fixed end date • Appears quiet, but lots of activities behind the scene • Handled by a small core team of leaders – merger task force • Purpose: to determine if there are any “show stoppers” or concerns that would prevent the two parties from merging • Involves exchange of vital documents • May involve external auditors and lawyers to review financial and legal documents • Due diligence team for each organization will scrutinize documents and follow up on any questions or concerns

  10. Letter of Intent • After the due diligence ends, each team presents their findings and recommendations to their Board • The Board will evaluate all aspects around the proposed merger • If the Board members determine that a merger is in the best interest of the two organizations, they will draft and sign a Letter of Intent to merge. • The Letter of Intent will include a timeline for a proposed close of the merger

  11. Merger Planning • Involves planning for the future • Corporate structure • Board structure • Management structure • Brand structure • A joint team will develop a communications plan • Staff • Clients • Donors • Federal, state, local authorities • Financial pro forma statements • What will the financials look like for the merged entity?

  12. Merger Close – Time to Celebrate • The Boards vote to approve the merger • Implement changes in legal form • Signing of the merger agreement • Changes to charters, bylaws, and third-party contracts • Unveiling of new brand, letterhead, etc. • Important: Timing of announcement between the two organizations

  13. New Leadership and Governance Structure • Leadership structure can vary based on specifics of the two merged entities • Chief Executive Officer (CEO) • Chief Financial Officer (CFO) • Chief Operating Officer (COO) • New Board structure • Blend of Board members from the legacy organizations

  14. Blending of Cultures • Cultures may appear similar on the surface • But values and customs may be very different • What stories are important in your organization’s history? • What values are important to your organization? • Who are our heroes? • What are your most cherished customs? • Try to define and document your culture before the merger • Agree on most cherished values and customs you want to retain in the new organization

  15. Implement Integration Plan • Establish combined financial reporting • Connect program teams and share expertise • Explore opportunities to leverage expertise across teams • Explore future expansion opportunities • Integrate administrative teams - specialization • Integrate systems to facilitate tracking and reporting • Enhance operations • Develop common policies and procedures • Share and implement best practices

  16. Retaining the Best of Both Organizations • Integrate Whole-Person, Whole-System health and wellness throughout the organization • Expanded opportunities for lateral and upward movement • Enhanced positive culture for staff and clients • Greater collaboration and communication • Brand name recognition • Pride in who we are and our common future • Strong IT systems and EHR foundation • Quality assurance and quality improvement • Efficient administration and operations • Specialization

  17. Importance of Change Management

  18. Importance of Change Management • Change cycle (feelings, thoughts, behavior): • Loss – fear, caution, paralysis • Doubt – resentful, skeptical, resistant • Discomfort – anxious, confused, unproductive • Discovery – anticipating, creative, energized • Understanding – confident, pragmatic, productive • Integration – satisfied, focused, generous • Each person will go through each stage at their own pace • Work with your team to help them get “unstuck” in any of these stages • Communicate, communicate, communicate!!!

  19. Role of Leaders • Be a positive role model • Stay informed to ensure one consistent message • Understand and feel comfortable with the message • Communicate openly, share information with your team • Address staff questions openly and honestly • Address rumors and gossip right away • Work with your staff through concerns and emotions • Support an environment of openness • Support each other, be mindful and kind • Recognize that you may feel a wide range of emotions as you go through this change and seek support

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