Success Factors in Nonprofit Mergers - Minnesota Council of ...

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Success Factors in nonprofit mergers Factors proven to make nonprofits mergers more likely to succeed the merger from different perspectives. The number of completed interviews ranged from three to eight per merger. In each case, respondents included at least one person representing the organization that was dissolved or acquired as part of the merger, the current executive director, and at least one other person, often a board member, who was knowledgeable about the merger. Figure 1 shows the distribution of respondents in their roles at different times during the merger. 1. Respondents’ positions during the merger Pre (N=195) During (N=187) Post (N=176) Current (N=141) Executive leadership 66 63 60 50 Board of directors or governance 74 70 66 49 Program administration or management 18 18 17 13 Financial administration or accounting 10 11 11 7 Consultant 9 10 7 6 Staff 11 9 9 5 Member or volunteer 5 4 3 6 Marketing or communications 2 2 2 2 Development 0 0 0 1 Other 0 0 1 2 Financial data collection To learn more about the financial state of organizations involved in mergers, financial data were obtained from publicly available 990 tax forms accessed from GuideStar. When available, forms were collected for the three years prior to the merger for all organizations involved in the merger, the first year of merged operations, and the three years following the merger. Data from 349 tax forms were available, representing 84 of the pre-merger organizations and 38 mergers. The analysis focuses on three ratios that could be calculated for the majority of organizations for each of the three time periods identified above. Current Ratio This is a calculation of the current assets divided by current liabilities. It is an indication of an organization’s ability to pay obligations in a timely way (within 12 months) and is a useful indicator of cash flow in the near future. A commonly excepted standard for reasonable performance is a ratio of 1:1, but a higher ratio is better. Success Factors In Nonprofit Mergers 21 MAP for Nonprofits & Wilder Research 2012
Success Factors in nonprofit mergers Factors proven to make nonprofits mergers more likely to succeed Debt Ratio This is the calculation of total liabilities divided by unrestricted assets. It is an indication of how much the organization is relying on funding from others, such as loans, payables, and obligated funds. Overall, it is an indication of how much of a financial cushion exists for the organization. A commonly excepted standard for reasonable performance is a ratio of 2:1. A lower ratio is better but it may be appropriate to have a higher ratio if the liability is for a productive purpose, such as a building or financing for a housing project. Days Cash on Hand This is a calculation of the number of days a nonprofit is able to cover their budgeted operational expenses with their liquid assets. The number of days is calculated by first subtracting depreciation, pass through grants, and any other non-cash expenses from the total expenses for the year and dividing that number by 365. This is considered the daily cash required for operations. Then, the total liquid assets (cash and short-term investments) are divided by the daily cash required. The resulting number represents the number of days the organization could operate without collecting any addition revenue from accounts receivable, long-term investments, or endowment. A commonly accepted standard is to have 90 days cash on hand. However, an organization with stable payment of accounts receivables may operate with fewer days cash on hand. Quantitative data analysis The key informant interview protocol included 125 closed-ended questions, questions for which respondents had pre-determined response options (e.g., yes or no, scales, or categories). However, because this is a study of mergers, and not individuals, it is more suitable to look at the data in terms of mergers. Therefore, individuals’ responses from each merger have been aggregated to the merger-level. This is done differently depending on the type of closed-ended question and the intent of the question. The following provides a brief description of how case-level variables were defined using individual responses relevant to each merger. For most of the closed-ended survey questions, respondents answered based on a fourpoint scale measuring their level of agreement (“strongly agree” to “strongly disagree” with no neutral option) to a wide range of statements related to the merger. For these questions, the criteria developed to aggregate the individual responses into a mergerlevel composite focuses on the extent to which there is “consistent agreement” among the respondents regarding the various statements. When mergers are said to have consistent agreement, this essentially means that all of the respondents from that merger either “strongly agree” or “agree” with that statement. Success Factors In Nonprofit Mergers 22 MAP for Nonprofits & Wilder Research 2012
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Merger study master interview Bibli
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4a. Are you currently involved with
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LOGIC FOR DETERMINING WHAT SECTIONS
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13. Was one of the pre-merger organ
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[IF MORE THAN ONE CHAMPTION > ASK A
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23. I am going to read a list of co
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31a. Did they continue to fund the
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2. Merging process My next question
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50Z. What else should we know about
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57. Overall, how would you rate the
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65. The next questions are about ex
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74A: What new operating policies we
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4. Current organization The next qu
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89. Those are all of the questions
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