Investigation of Association Mergers › wp-content › uploads › 2014 › 07 › ... · 2017-03-08 · INVESTIGATION OF ASSOCIATION MERGERS 6 M ergers involve two or more associations

Investigation of Association MergersReport to The William E. Smith Institute for Association Research

Julie Pietroburgo, PhDAssistant ProfessorDepartment of Public Administration Southern Illinois University

Stephen P. Wernet, PhDProfessorSchool of Social Work in the College of Public ServiceSaint Louis University

March 2007

C o n t e n t s

3 Executive Summary

5 Introduction

7 Merger Basics

9 The Process of Making a Decision to Merge

19 Merger Reconsideration: Deal Breakers

23 Legal Considerations

25 Conclusions

26 References

27 Further Reading

28 Research Method

29 About the Researchers

F o c u s P o i n t s

10 Pre-Cursor Partnering

12 Social Capital

14 Culture

17 Communication

18 Trends in the External Environment

19 Implementation Timeline

22 Leadership

24 Time Necessary to be Successful

Investigation of Association Mergers published by The William E. Smith Institute for Association Research.Copyright © 2007 SmithBucklin Corporation. All rights reserved

F or many associations and their members and stakeholders,mergers can offer tantalizing opportunities for growth, posi-tive options to deal with industry consolidation and/or theability to secure an organization’s future in the face of dwin-

dling financial resources and membership base. Despite these power-ful potential upsides, in the not-for-profit arena very little research hasbeen done that provides perspectives that can help guide associationsthrough a successful merger.

The purpose of this research is to provide precisely that by determin-ing how successful mergers occur. The findings suggest that in orderfor any merger to be successful, there are a number of key elementsthat must be in place. Conversely, the research points to distinct fac-tors that often lead to the failure of a merger attempt. The reportexamines these indicators of success and failure in the context of fourdistinct stages that the research shows are integral to the mergerprocess. The study also examines the reasons that associations pursuemergers and alliances, and how merging associations differ fromthose that do not seek alliances.

This research is based upon the in-depth examination of 11 associa-tions that have engaged in merger activity in the last five years. Theassociations studied vary in size, focus, geographic reach, structureand the degree of success of their merger attempts. Detailed informa-tion about factors contributing to various mergers and mergerattempts was secured through face-to-face and telephone interviewswith board and staff executives of each association studied.

Keys to Merger Success

The resulting case studies revealed a number of key elements that areindicators of merger success. Associations hoping to merge must beattentive to these key elements:

Communications

Open, honest dialogue and a willingness to share information duringthe merger discussion stage; effective handling of external leaks andthe internal “rumor mill” during the negotiation stage; and provisionof detailed instructions and sharing with key internal audiences newsof progress made during the implementation phase.

Leadership

The need for a “catalyst leader” – an individual who recognizes andcommunicates the need for a merger – and the emergence of a nucleusof like-minded individuals committed to seeing the merger becomea reality.

The Appropriateness of Time

Appropriate time periods must be allowed for precursor partnering,merger discussions, negotiations and implementation in order to allowfor the building of relationships, the establishment of processes thatfacilitate collaboration and the addressing of the legal, financial andoperational details of merging.

Social Capital

The emergence of trust and familiarity, as well as the congruence ofvalues, missions and goals – through face-to-face interactionsbetween people in informal settings outside the boardroom.

Retention of Culture

The retention, honoring and integration of the distinctive and mean-ingful cultural elements of the former associations as the new entityis created.

Of all the merger impediments that associations face, however, noneis more important than the failure to understand that association merg-ers occur between people, not organizations. Mergers work only whenassociations take the necessary steps to build social capital to resolvecultural conflicts, provide sound leadership and build teamwork dur-ing periods of discussion, negotiation and implementation.

Merger Deal Breakers

The research also revealed factors that often derail a merger attempt.In addition to those that are simply opposites of elements necessaryfor success, some of the key deal breakers are:

Opposing Cultures and Opposing Players

Overlooking irreconcilable cultural elements, or the presence ofrespected players who are vocally opposed to a merger, may be allthat is necessary to condemn a merger.

Absence of Congruent Missions

Potential improvement to the financial bottom line cannot overcomesituations in which the missions of merging associations are incom-patible.

Absence of Support and Culture

Merger discussions will not succeed if internal or external stakehold-ers strongly favor the ongoing independence of one or both of theassociations.

EXECUTIVE SUMMARY

T H E W I L L I A M E . S M I T H I N S T I T U T E F O R A S S O C I A T I O N R E S E A R C H 3

Lack of Awareness of Need for Change

People may be unwilling to invest the necessary resources to worktoward new partnering arrangements if there is a lack of awareness ofrisks facing the associations that make a merger advisable.

Distinct Merger Stages

The case studies comprising this research revealed that the mergerprocess involves four distinct stages:

Precursor Partnering

Associations engage in precursor partnering, which often involves aseries of less formal and transitory partnering arrangements betweenassociations around issues and activities of similar interest. While notall organizations engage in this early partnering, those that do findthat such collaborative efforts provide valuable opportunities to buildtrust, familiarity and common experiences.

Merger Discussions

Early discussions of the merger option surface and begin to take shapethrough informal conversations among a small group of key boardmembers, volunteers or staff leaders. Personal relationships, opencommunication, and trust-building typify these early discussions inproductive scenarios.

Formal Negotiations

Associations become more intentional in their approach to the merg-er option and have the necessary strategic deliberations regardingissues involving governance, structure, finances, physical facilitiesand asset distribution. During this stage, the necessary due diligenceis performed and formal votes to merge are taken at the board andmembership levels.

Merger Implementation

Two or more associations become one through merger implementa-tion and management of all the attendant operational details.

Conclusion

Associations hoping to merge vastly increase the likelihood for suc-cess by incorporating into the process a number of key elements andavoiding certain conditions that can doom a merger to failure. Despitethe insights provided by this research, there is ample opportunity forfurther study of association mergers. A number of areas that remainlargely unexplored include the long-term results and implications ofmergers, the differences in mergers across types of associations andindustry sectors, and the most important elements of association com-patibility that contribute to merger success. As more associations con-sider mergers as a strategic option, findings from additional studieswill be useful in helping them navigate the pitfalls and realizing thepromise inherent in these transactions. •

I N V E S T I G A T I O N O F A S S O C I A T I O N M E R G E R S 4

Distinct Merger Stages

Precursor Partnering Merger Discussions Formal Negotiations Merger Implementation

R ampant mergers and acquisitions over the past decade inthe private sector have prompted nonprofit associations toincreasingly consider joining forces as a potential strategyfor growth and survival. The rush to jump on the merger

bandwagon is occurring as trade and professional associations alikeexperience overlap in many functional areas such as conventions, edu-cational opportunities, lobbying, and most importantly, membership.

To those witnessing this wave of organizational partnering, the rationaleappears sound. Mergers are a way for association leaders to address amyriad of issues including those of duplicative memberships, similarityin functions, increased operational costs, and defense against industry

consolidation. Additionally, mergers enable organizations to retainmembers and fee income as well as remain competitive and relevant inchanging association environments. By outward appearances, manymergers appear to enhance the stability and growth for involved partners.

Not all mergers are created equal. The experiences of the 11 associa-tions examined in this study suggest that this type of long-term part-nering takes a variety of forms and involves an array of risks andrewards. Mergers are complicated business, involving, much morethan the mastery of legal, financial, and structural elements. Lessonsfrom these cases provide valuable instruction for those at the cross-roads in considering their own mergers. •

INTRODUCTION



M ergers involve two or more associations that cometogether for purposes of forming an entirely new asso-ciation, reflecting the interests of all parties in an even-handed manner, (mergers differ from acquisitions

whereby one organization is subsumed into another dominant organi-zation.) In mergers, the combining of resources and assets occurs ona number of different levels: two or more boards of directors, sets ofmembers, policies, financial statements, and cultures. Generally, italso describes the process of joining of two or more associations toserve the same customers or members. To carry out a merger, a merg-er agreement is required to legally combine the separate entities andto establish the name, governance, structure, program offerings, finan-cial arrangements, asset disposition, and other key attributes of thenew association. Frequently, state laws also specify the terms of non-profit mergers (Taylor, 20001).

In reality, mergers can viewed as only one end of the continuum ofpartnering options available to associations. Kohm, La Piana, andGowdy (20002) have conceptualized these alternatives as a continuumprogressing from collaboration through alliance to integrationor merger.

The Partnering Continuum

Collaboration involves arrangements where there is no permanentorganizational commitment, decision-making continues to reside withthe individual organizations, and a low degree of formality and struc-ture are attendant. Examples of collaboration are joint fundraising orpublic relations campaigns.

Alliance offers a middle-ground position involving cooperation forthe foreseeable future and shared decision-making. Alliances are for-malized arrangements that are agreement driven, include administra-tive consolidation (where specific functions are mutually supportedby the participating organizations), and joint programming (involvingthe shared provision and management of common programsand services).

Integration involves changes to corporate control and creation of anew organizational entity. Integration commonly includes mergers,

MERGER BASICSPartnering Continuum

Collaborationi.e. joint fundraising or p.r. campaigns

Autonomy: Informalno change to structure

Alliancei.e. joint programming

joint administration

Integrationi.e. mergers, management

service organizations

Integration: Formal,changed structure/control

Source: Kohm, La Piana and Gowdy, 2000.

the establishment of management service organizations, and parent-subsidiary structures. Mergers tend to be the most difficult form ofpartnering because the inherent structural changes require that partiesgive up autonomous control for shared ownership.

The Legal Framework

The legal framework for mergers most commonly require:

• The approval of the majority of each association’s board of directors

• Clarification of the purpose and mission of the new association• Specification of the terms and conditions of the merger• Drafting of the new association’s articles of incorporation

and bylaw• Restructuring of the board• Any approvals required by state law (Taylor, 20003)

While mergers are not the only alternative for organizations facingfinancial pressures or looking for greater operational efficiencies, theycan be the right answer for some. So, when and how does an associa-tion determine whether the chemistry and conditions are right for amerger to work? •


I t is important to understand the process of merger decision-making. The associations examined in this study led to the iden-tification of four stages common to the process. In Stage 1,associations frequently engage in precursor partnering activi-

ties. These are the attempts at working together in some form or fash-ion prior to any deliberate discussions of integration. Commonactivities during this stage include joint marketing, shared administra-tive services, joint educational initiatives, and shared membershipmeetings. Stage 2 is the merger discussion phase where the initial ideaof integration is broached and is allowed to germinate through infor-mal discussions usually at the board level. Stage 3 is the formal nego-tiation period where associations become more formal and intentionalin their approach to the merger option and have the necessary strate-gic deliberations regarding how they would integrate. Issues of gover-nance, structure, name, staffing, finances, physical facilities and theother matters are addressed in Stage 3 and the necessary due diligenceis performed. Stage 3 also encompasses the necessary votes at theboard and membership levels to achieve the merger, the signing of thenecessary merger documents and announcements to all internal andexternal stakeholders. Stage 3 tends to be an equally board and staffintensive effort. Stage 4 is the merger implementation phase and tendsto be staff driven. This stage involves the multitude of tasks necessaryto making the merged entity a reality.

As associations proceed through these stages in exploring the mergeroption, key questions and issues emerge. These key questions andissues are considered in the paragraphs that follow. Based on the expe-riences of the 11 associations that were studied, whether and howassociations addressed these questions and issues determined theireventual success or failure in the merger process.

Stage 1: Precursor PartneringHas the association built a track record of partnering with others?

Before an association begins the process of considering a merger, ahistory of working with other organizations in some collaborativearrangement often exists. Among the associations studied, the major-ity of those that were successful in their merger attempts had exten-sive experiences previously with partnering. Their partnershipattempts were substantive in the sense that they involved front-linepersonnel and management. These were not just partnerships on paperbut involved some ‘real marriage,’ of their operations. Through theseearly partnering efforts, even if they did not involve the associationswith which they would eventually merge, associations learned a great

THE PROCESS OF MAKING A DECISION TO MERGE

deal about the necessary give and take of joining forces and their gen-eral receptivity to collaboration.

Stage 2: Merger Discussions

There are four questions to facilitate answering the larger question ofwhether an association should consider merging with another. Thesefour questions concern the association’s operating environment.

Has the external, operating environment changed?

Are association members facing a significantly different operatingenvironment than the one of even five years ago? Has the risk facingmembers increased? A change in the external operating environmentfor the membership body is often the first signal that some form ofassociation restructuring including a merger may be appropriate. To besure, operating environments for most industries have changed signif-icantly in the past 20 years and the rate of change also has accelerat-ed. NAFTA and other free trade agreements have globalized mostindustries. Regulations have altered how business is conducted andincreased operating costs. Many industries have experienced contrac-tions and consolidation including a reduction in the number of domes-tic manufacturers and joining of distribution channels. Thus, manyassociations are seeing declines in membership that can be attributedto changes in the industry served by the association. While theseindustry shifts may not immediately threaten the association’s exis-tence, they have long-term, critical implications for the association’sviability. Such changes in environmental conditions are frequently thelynch pins signaling a need to consider restructuring strategies, includ-ing a merger with another association.

Is the association experiencing increased pressures for efficiency?

As a result of changing operating environment, virtually every indus-try has faced the need for greater operational efficiencies. Whether itis where money is spent, how employees work, or where technologyis incorporated, organizations have had to identify new ways to stretchoperating dollars and eliminate unnecessary expenses.

Members expect their associations to be proactive or at least respon-sive to their needs for greater efficiency and cost savings and delivermore for the membership dollar (Prokuski 20024). Associations thathave looked intently at ways to reduce spending and operate more effi-ciently through changes in their conventions, educational opportuni-ties and lobbying, and are now considering more substantivestreamlining actions. Although some of this pressure to cut expenses


may come from the association itself, significant demand forincreased efficiency comes from members.

Are there changes in the association membership?

From an industry perspective, membership in professional and tradeassociations continues to rise, whereas in a few of the case studiesthere, in fact was a decline. That said, steady membership year afteryear is the sole measurement of organizational success. Associationsmust continue to evolve and change in order to do their best to servetheir members. One such value-added service may be the considera-tion of a merger in particular when two or more associations are serv-ing the same industry. With growing pressures for efficiency, manyorganizations are determining that they can no longer justify dualmemberships in associations that are viewed as being duplicative inmission or services. The overlapping of association membership isdiluting the pool of available members.

Is there a critical mass of awareness about the need for a merger?

Although these signals of external change may be quite apparent, theycan be lost in the daily routine of association work. In order to move

forward, a critical mass of awareness must build about the impact ofany or all of these factors upon the life and future of the association.There are three elements involved in building a critical mass of inter-nal awareness.

• Association leaders, either staff, board or both, must be aware ofthe changing environment within which the association operates.

Is there a critical mass of awarenessabout the need for a merger?

Are there changes in the association membership?

Merger Discussions

Has the external, operatingenvironment changed?

Is the association experiencingincreased pressures for efficiency?

FOCUS ON PRE-CURSOR PARTNERINGMany associations do not prepare for mergers in advance.Given the finality and formality of a merger, associations havefound it makes sense to attempt to merge only after a trackrecord of other successful partnering efforts has been estab-lished.

Kohm, La Piana and Gowdy have conceptualized the poten-tial partnering and restructuring options for organizations as acontinuum ranging from collaborations which are informal andlimited in time and scope (i.e. joint fundraising or public rela-tions campaigns.) to alliances which are more formal, longer-term arrangements and agreement driven (i.e. sharing ofadministrative services and joint programming and services)to mergers which involve the integration of governing bodies,operations and staffs. Alliances and collaborations are oftenpre-cursor activities that lead to mergers.

What are the benefits of such pre-cursor partnering activities?There are a number. Collaborative efforts provide each asso-ciation useful information about the quality and suitability ofpotential partners. When associations engage in multiple part-nering arrangements, they then have the benefit of selectingthe merger partner that presents the best operational andphilosophical match for them. Alliances also provide an earlyunderstanding of potential integration issues. Potential prob-lems and pitfalls of integration can be identified and person-nel critical to the process can be brought on board. Perhapsmost importantly, precursor activities enable the prospectivepartners to establish a level of trust and to understand thenuances of their respective cultures. This understanding iscritical to moving forward in the negotiation and implementa-tion phases of any merger.

Of the 11 associations researched, eight had engaged insome type of pre-cursor partnering activity prior to seriousconsideration of the merger. The March 2006 merger experi-ences of the National Association of Store FixtureManufacturers (NASFM) and National Association of DisplayIndustries (NADI) provide good examples of the manner andmerit of such partnering.

NASFM Executive Director, Klein Merriman, explains that themerger was facilitated by the five years that the organizationsshared administrative support services. “In 2001, NADI repre-sentatives came to NASFM and requested that we provideadministrative support services to their association. Throughan administrative services agreement, we began maintainingNADI’s membership records, prepared their financial state-ments, did their meeting planning and I became the organiza-tion’s Executive Director. While the boards of theorganizations remained separate and the NADI brand sur-vived, this five-year period enabled the organizations to builda deep level of trust. The shared administrative services leadto joint meetings at trade shows and discussions between keypeople from each association. Once the idea of actual merg-ing was broached, we had already laid the groundwork for aswift decision and merger implementation.”

Andy Cagnetta, Executive Director of the Florida BusinessBrokers, agrees that a variety of pre-cursor partnering activi-ties can pave the way for more substantive integration. “Co-branding of some services, and doing some preliminary worktogether through joint meetings and trade shows can breakdown hostilities and allow people to see the possibilities andpitfalls of partnering on a more permanent basis.” •


The leadership must see the importance of shifting industry com-position and association membership for the future of the associa-tion, and must be forward looking and proactive in recognizing thepossible need for a merger.

• Leaders within the association must be continually reading theenvironment to identify and understand the breadth and scope ofchanged environmental conditions. Some reliable data gatheringsystem, either formal or informal in nature, must be in place to stayattuned to industry shifts. Useful tools for data gathering includecompetitive analyses, market research, industry media, networkingwith peer associations and use of surveys, questionnaires, focusgroups and other open forums.

• There must be some recognition and understanding of the signif-icance of the change among the association’s key players. Aleader, or cadre of leaders in the association, must grasp the sig-nificance of the information and begin the dialogue regarding theneed to act. The importance of a leadership nucleus cannot beoverstated. The work of a merger will be borne, nurtured, anddriven by a core leadership team.

Stage 3: Formal Negotiations

The transition from informal merger discussions to active mergernegotiations rarely occurs in a seamless, smooth, and swift manner.As association leaders become more serious in their merger delibera-tions, they find that new concerns emerge. At this stage, there are anumber of questions to be asked to assess whether the internal timeand conditions are right for a merger.

Are internal perceptions favorable for partnering?

Is the internal environment open to partnering options? Key leaders,as well as the customs and practices of the organization, need to beopen to the idea of working with another organization in some com-plementary manner. Associations with a long history of workingautonomously and strong adherence to a tradition and culture of inde-pendence may find the idea of merging untenable.

If, however, collaboration is an agreeable strategy for the association,the next step in the process of merger negotiation is assessing the fitwith the prospective partner. Markets, missions, memberships, andstrategic goals are among the crucial characteristics that must bescreened to assess partner compatibility.

However, partnering that looks good on paper may be difficult to nego-tiate if past perceptions get in the way. To move to a serious dialogueabout mergers, an association must move away from a perspective ofthe other organization as a competitor and toward a view of the asso-ciation as a valued, prospective partner. This shift in thinking can bemonumental, particularly if the associations have been closely alignedin their fields of interest but with competitive histories and approachesto doing business.

Changes in perceptions of potential partners are precipitated by recog-nition of a larger external threat. Organizations realize that ego andpast precedent are the sole reasons for holding on to their independ-ence in the face of mounting external pressures. The attractiveness ofa potential partnership also may be enhanced by a new awareness ofsome important shared values or assets between the organizations –whether it is common mission, overlapping members or compatiblepractices and services. Through preliminary discussions particularly at

the staff levels, organizations may come to see that what they thoughtwere very different philosophies about how to approach their work andmissions, are not so dissimilar after all and that combining forces canmake the resulting operation stronger. Mergers may also be facilitatedby recognition that an association has the core competencies that theother organization is lacking (Social Entrepreneurs 20055).

The formal negotiation process is made immeasurably easier once thisshift in thinking about the prospective partner occurs. Associationsthen are able to approach the negotiating table without a “winner takeall” mentality. Through the demeanor and actions of the board andstaff executives, guardedness can give way to a willingness to findcommon ground. Each association is valued for the respectivestrengths and resources it brings to the merger transaction and eachassociation is ready to share freely of those assets for the benefit ofthe new organization and its future.

Is there a “dominant player” in the merger?

In the final analysis, mergers of associations that are truly equal rarelyoccur. Case studies and the experiences of consultants in the fieldshow that when associations agree to merge, one organization gener-ally operates from a more powerful position. The dominance of oneassociation may not be explicitly acknowledged by all parties butoperates on an implicit level throughout the merger negotiations.However, failure to recognize on some level the dominance of onepartner can be counterproductive to the process. Jockeying for posi-tion can serve to delay critical decisions, block the transition process,and contribute to the turmoil and loss of productivity that occur in anymerger. Therefore, a question that must be answered early on is “whois the dominant player”? (Prokuski 20026).

Dominance in the merger transaction is exhibited in a variety of ways:financial position, the size of the membership body, the depth ofboard and staff expertise and the breadth of operational capacity.Rather than a negative element, the dominance of one party can serveto advance mergers, if the dominant player is recognized by all andallowed to direct merger negotiations and navigate barriers.

While dominance of one party is an element of most successful merg-ers, there is a limit to the degree to which that dominance can be exert-ed and exhibited. In public venues (in ways that are visible to themembership and important external stakeholders), there must be anappearance of equity in the merger transaction. The picture of fairnessand equity can be communicated through the careful placement of keyboard and staff executives in the new organization, the retention of

Existence of a catalyst leader

Existence of a dominant player

Nucleus of drivers

Extended discussion period

Congruence of missions

Opportunities for trust and connection

Internal perceptions arefavorable for partnership

Formal Negotiations


past practices in the new organization, the transition of members tothe new entity and even in the naming of the new organization. Therisk of not paying attention to the picture of fairness is that stakehold-ers will not freely shift their allegiance to the new association for fearof what is being lost in the transaction.

Is there a perception of high stakes in the merger? Mergers are high-risk endeavors. The investments of time, resources, and emotionalcapital are significant. Associations that pursue mergers must view thestakes as sufficiently high to warrant such investments with the costsand benefits of the merger equally clear. Not only do partners have tobe able to answer the question of “what’s in it for me” in a positivemanner, but they must also view the consequences of not merging tobe an unacceptable risk to the organization’s future (Linden 20027).

Among the questions to be honestly answered at this stage are:

• Will the merger enhance the association’s ability to achieve itsmission and goals?

• Will service to members be improved or expanded as a result ofthe merger?

• Will the association be able to operate in a more cost-efficientmanner as a result of the merger?

• Will the financial position of the association be improved?

Associations must not overlook that merging involves a significantexpense. Costs such as integrating information systems, hiring of con-sultants, lost productivity of employees, replacement of signs andmedia, moving of office space and communicating with members andexternal stakeholders are expenses to consider. Realistic assessmentof these costs on the front-end is important to crafting a workableagreement.

Real and imagined obstacles in the merger process will inevitablyarise. For these obstacles to be overcome, the rationale and impetusbehind the action must be viewed by both associations as essential tothe future.

Is there a catalyst leader?

There must be an individual within the organization (usually a boardleader or staff executive) who serves as the catalyst in moving themerger forward. The catalyst leader serves a number of vital roles inthe merger transaction. The leader is the one that identifies the need,begins the serious dialogue with those who are instrumental to action,function as an architect of the merger, and serves as the chief salesper-son to the critical constituencies of boards, staffs, and memberships.

A number of leadership characteristics appear common to these indi-viduals: decisiveness, foresight, interpersonal skills, and creativity.

United States Bowling Congress

FOCUS ON SOCIAL CAPITAL

O ne of the greatest challenges associations facein merging is moving past an “us versus them”mentality. When two formerly competitive asso-ciations join forces, the baggage from past rela-

tionships may be difficult to leave behind. The building ofsocial capital becomes critical to moving past rival histories.

Social capital refers to the collective value of networks of peo-ple and the propensities to do things for and with each otherthat arise from these networks. Social capital flows from thetrust, reciprocity, information, and cooperation associatedwith and shared within social networks. It evolves from peo-ple’s recognition of their common interests, practices, andideals. In addition, social capital often develops in associa-tions from an awareness of the congruence of the organiza-tions’ missions, purpose, and goals.

In the merger process, social capital must exist, and be culti-vated, within each phase of creating and implementing thedeal. Associations must find ways to build social capital andthe bonds between people if the merger is to succeed.

Merger Discussions and Formal NegotiationsWhen discussing and negotiating the merger, individuals atthe negotiating table must start with an overriding common

purpose and commitment to working in good faith. They alsomust have the authority to make decisions and a willingnessto find common ground. A small, minimally structured groupof representatives of key constituents, including Board andstaff, can provide the foundation in the building of social cap-ital between organizations. But social capital building rarelytakes place solely in the boardroom. Informal, face-to-faceinteractions offer opportunities for building trust betweenpeople on a personal level rather than as representatives of anorganization. If and when this core group can lower or removeinitial barriers of mistrust, the seeds of social capital betweentwo formerly competitive associations can begin to be sown.

Formal NegotiationsWhen implementing the merger, the boundaries of social cap-ital building must be broadened. Building upon early elementsof social capital established by the core group, everyone musthave a part to play in the implementation process. The build-ing of social capital at this stage cannot be rushed. Sufficient,prolonged periods of discussion and transition should beallowed. Building bridges between people and organizationstakes time. People and groups will dictate the speed and theircomfort as the process evolves. Again, opportunities for inter-action between people outside of the formal process of imple-mentation establish trust.


When the United States Bowling Congress was formedthrough the merging of three bowling entities (AmericanBowling Congress, Women’s International BowlingCongress, and the Youth American Bowling Alliance), keyexecutives, and board members recognized early on that thesolid relationships between people would set the stage formerger progress.

“We started the process and were immediately at an advan-tage because of the people involved. Most of the staff werelong-time employees with more than five years in their respec-tive organizations. We had great rapport with each other.Among the three negotiating leaders, the communication washonest, open, and up front. We genuinely liked and respectedeach other, ” says Roseanne Kuehn, former CEO of theWomen’s International Bowling Congress.

Driving the implementation phase, bringing field and staffpeople into the process solidified the merger plan. “Webrought people in from the field to help sell and strategize themerger,” says Kuehn. “Transition meetings were held through-out the country as a way to not only communicate the ration-ale behind the merger, but to solicit field input to the process.

Despite the rapport and strong agreement within the coreteam and the efforts to involve field personnel, USBCExecutive Director Roger Dalkin understood that mergingthree associations with over 234 combined years of bowlinghistory would take time. He was willing to wait until the timewas right for the merger to happen. In the case of USBC, thatmeant 30 years of preparing for a potential merger and fourattempts at putting it before the members. “I had a long termbattle plan which required the concurrence and cooperationof the membership in the field at the local level, as well as theboard and staff. When the final membership vote was taken,99% of the locals filed letters of intent to join the USBC.”

Dalkin adds that the building of social capital throughout themerger process was facilitated by “being consistent betweencore values and behavior. For example, inside our buildingthere are no door locks because it is inconsistent with ourcore values of honesty and trust.” Further, Dalkin built socialcapital in the new merged association by “paying attention tothe little things. We saved and incorporated some of the tra-ditions of the former associations while building new tradi-tions. We emphasized inclusiveness and empowerment as amanagement style.” •

Additionally, these are individuals who are committed to the mergeraction beyond their own personal gain – and often times at risk to theirpersonal future in the newly merged organization.

Is there a nucleus of drivers?

Catalyst leaders cannot single-handedly effect the merger. From thebeginning, the catalyst leader must bring to the table the individualsfrom the board and executive staff with the authority to make reorgan-ization decisions. Nevertheless, merger success is more than involv-ing the individuals with necessary decision-making authority. A keycomponent vital to merger progress is the formation of a key nucleusof like-minded, proactive individuals willing to put their heads andhearts behind the merger cause.

A small, minimally structured group with representation across theboard and executive ranks of the merging associations is instrumentalin crafting the merger plan. They provide the reliable ideas, perspec-tive, legitimacy, commitment of necessary resources, and a sense ofstability that go beyond those of the catalyst leader. Members of thegroup share an overriding, common purpose and a commitment tonegotiate in good faith. While the merger idea might not have origi-nally been their own, all members must embrace the rationale behindsuch a move and be as driven to seeing the process through to success-ful implementation as is the catalyst leader. Open and trusting rela-

tionships between the members enable the group to successfully iden-tify and address all the contentious issues involved in the merger andthen to weather the inevitable reorganization obstacles posed byboards, staffs and memberships.

Is there an extended period of discussion?

Mergers take time. Associations considering mergers face a multitudeof legal, governance, financial and administrative issues that must bethoroughly addressed. Due diligence describes the exhaustive processthat organizations must undertake to assure no harm will come to theorganization, its assets and its resources as a result of the mergertransaction.

Even more critical than these concerns, organizations must acknowl-edge and respond to their cultural differences. Prolonged and in-depthdiscussion is critical to addressing real and perceived differencesbetween organizations. Cases studies showed that an average of 18months in the merger discussion and negotiation stages prior to for-mal votes or actions on merger proposals. For a merger to be success-ful, these extended periods of discussion and negotiation are eitherpreceded by or conducted in concurrence with some precursor part-nering activities. Associations rarely approach the merger optionwithout having successfully partnered in a number of less threateningways in the past. Joint marketing, co-location of offices, shared


the U.S. Bowling Congress headquarters in Milwaukee, onewall displays the history and artifacts of the women’s bowlingorganization. Another wall honors the men’s organization. Theachievements of the children’s organization are displayed onthe third wall and the fourth highlights the milestones of thenewly merged organization.

Other significant cultural symbols preserved in the mergedassociation included the scholarship program of the youthassociation and key tournament events.

Nurturing a New Organizational Culture

Dalkin suggests that while cultural artifacts and behaviorsfrom the predecessor organizations should be preserved,there comes a time when a new cultural identity should becreated. According to Dalkin, leaders at the executive levelare the principle source for crafting an organization’s ideolo-gy, articulating core values, and specifying norms.Consequently, Dalkin pushed hard on the new association’sleadership team to redefine the culturally acceptable ways ofpursuing goals. It took personal involvement in articulating amessage of a common vision for the merged organization,considerable attention to the vocabulary employed in writtenmaterials and realignment of employees in key positions whosymbolized intractable ties to the past. Leaders alsoaddressed the formal interaction rules for the organization.Revised procedures for chartering of affiliates were estab-lished, minimum standards for affiliate operations were enact-ed, and qualifications and expectations of board memberswere newly defined. Values and norms, once transmittedthrough the organization, established the permanence of theorganization’s new culture. •

administrative services organizations, and collaborative educationalprograms are examples of ways that organizations test the partneringwaters prior to any decision to merge. Further, a long history of board,volunteer leaders, and staff executives working together on commonprojects or initiatives can establish the interpersonal foundation formore meaningful organizational partnering. Precursor activities pro-vide the opportunity to build relationships, trust, and knowledge ofcommon interests, practices, and ideals.

Is there a congruence of missions?

Existing or new missions and strategic goals must be in agreement.Through intense, early dialogue between the potential partners, organ-izations must be assured that they are in fact headed in the same direc-tion and that the priorities they assign to various strategic goals arealigned. Answers to questions of who they are serving and how they

are serving must be compatible. Furthermore, there must be a sensethat the vision for the future is something that the prospective partnerscannot realistically or optimally achieve individually. Associationboards and executives must be convinced that as compared to work-ing independently, the new organizational structure will enhance theassociation’s ability to accomplish its goals.

Is there opportunity to build trust and interpersonal connectionsbetween Boards? Staff?

Merger negotiations and the due diligence processes that accompanythem often lead to formal and prescriptive interactions between merg-ing organizations. If the merger is to be successful, key parties mustbe afforded ample opportunity for the face-to-face, informal interac-tions that build trust on a personal level. Social capital must be builtbetween the key parties and this is often orchestrated by providing

United States Bowling Congress

FOCUS ON CULTURE

C ultural conflicts can emerge as formidable imped-iments to successful merger efforts. Culture iscomprised of the behavior and artifacts, values,beliefs, and assumptions of organizational mem-

bers. For organizations that have a long history of independ-ent operation, organizational change must include not onlychanging structures and processes, but also the merging andmelding of embedded cultures. While it makes good businesssense to combine operations, members will not willingly shiftallegiance to a new organization if there is a sense that some-thing of significant cultural value is being will be lost.

At the U.S. Bowling Congress, Executive Director RogerDalkin understood the critical role of culture in supporting orimpeding organizational change. Dalkin offers some insightsregarding the attention paid to culture in the merging of fourbowling groups with 6,000 local charter affiliates and 50,000volunteers:

Paying Attention to Cultural Symbols

Dalkin found that members want the assurance that as a newentity is created, the distinctive and meaningful attributes ofthe former organizations will be retained. Dalkin communicat-ed a respect for the past by preserving key traditions and val-ued artifacts of members. For example, the ceremonialprocession and parading of the flags at the annual associationmeeting held deep significance for long-time members of theWomen’s Bowling Congress. When the time came for the firstannual meeting of the merged association, Dalkin saw to itthat this ceremonial practice was carried over and expanded.

Dalkin also recognized the benefits of visibly honoring the his-tories of the merging associations. In the employee lounge of


informal opportunities for individuals to “break bread” outside of theformal negotiation process.

A merger process and the many meetings that are involved must bedesigned as open and participatory in order to contribute to an atmos-phere of trust. Key parties involved in the merger negotiations shouldview the process as designed to invite their frank sharing of perspec-tives, concerns, and issues. In this area, the devil is in the details: pay-ing attention to nuances of time, locale, representation, and agendacontrol in the negotiation setting.

Beyond those intimately involved in negotiating the merger details,associations also must be attentive to the communication needs of theother key constituencies including boards, staffs, and members.Loyalty and commitment to the new organization must be built delib-erately through communication that is consistent across audiences,factual with respect to what has been decided, optimistic about thefuture promise of the merged entity and appropriate given the requiredconfidentiality concerns at any given time. It is nearly impossible toover-communicate as good communication impacts how key con-stituencies will perceive and react to the new organization.

Stage 4: Merger Implementation

In mergers, the roots of implementation success or failure are estab-lished early in the process. The initial discussions and debate about themerger’s merits and perils set the stage for how well the implementa-tion will work once it begins. Because a merger can fail at virtually anypoint and at any time along the path of implementation, activities mustbe planned and carefully executed throughout the process.

Once the decision to merge has been made, a new set of factorsbecomes critical. There are five elements critical to the success ofimplementing a merger:

Are there transition champions guiding the process?

You must have people in place to lead or champion the transition.These are individuals who will conduct and shepherd the mergerimplementation work, identifying, orchestrating, and overseeing allactivities necessary to make the merged association a reality. Theseindividuals have responsibility for guiding how the two companieswill combine their operations and for seeing to it that the mergermeets its deadlines and performance benchmarks. Further, they helpthe merger process by setting the pace, creating a transition process,organizing the discussions and connections between the two organi-zations, and navigating around troublesome issues.

Transition champions may be designated from either the staff or boardlevels and may or may not come from players identified during themerger discussion or negotiations. Sometimes, associations hire for-mer staff or bring in outsiders on a temporary basis to effect the merg-er. Most importantly, these individuals must be personally invested inthe success of the merger and have the requisite time and status in theorganization to dedicate themselves to getting the job done. In return,they are invaluable to help make and implement the tough decisions,thereby insulating the new board and key staff from transitionheadaches, complaints, and backlash.

Do stakeholders have a role to play in the transition?

One of the many tasks of transition champions is building bridgesbetween people through interpersonal interactions. Everyone, allkey stakeholders from both associations, should have a part to playin the implementation. Associations cannot afford to alienate staffmembers through the merger process and this can happen wheneither staff is left out of decision-making that impacts their day-to-day activities. Opportunities to build support within the staff groupcan be missed when the rationale behind key decisions is not com-municated, and their ideas and input are not solicited. By includingpeople in the implementation work, interpersonal connectednesswill be fostered among the members who are key to forging a newassociation identity.

Is the transition planning process thorough?

Planning for the merger must be exhaustive and comprehensive. Itmust be expertly planned and carefully executed. No stone can be leftunturned; no procedure overlooked; no administrative detail ignored.Committee meetings, checklists plus continuous conversations, phonecalls and electronic exchanges are mechanisms for executing the plan.Transition teams should be formed to identify the nuts and bolts of themerger implementation, and meet regularly to monitor activityprogress and address stumbling blocks. A comprehensive transitiondocument also becomes an essential tool for not only assuring theprocess is proceeding on course, but for holding individuals andgroups accountable for their respective roles.

Are cultural elements respected?

The delicate merging of organizational cultures can be facilitated bypaying attention to and preserving key cultural elements from each ofthe predecessor associations. Retaining valued and public symbols ofthe former organizations signals respect for the staff, membership,and the history of each group. Whether it be holding on to some ele-ment of a former logo, an annual meeting practice or a long-standingmembership newsletter, such actions communicate that the neworganization will maintain and build on the values and traditionsimportant to the former association’s key stakeholders. If the retainedartifact is a physical or tangible element that can be prominently andpublicly exhibited, this practice can be particularly powerful.

Is sufficient time allowed for the transition?

Implementing a merger decision takes time. It requires a long, andperhaps even extended, transition period to do such things as move

Transition champions guidedthe process

Stakeholders played a rolein the transition

Transition planning was thorough

Cultural elements were respected

Sufficient time was allowed

Merger Implementation


offices, combine financial systems, integrate technologies, and mergememberships. Changes do not and cannot happen overnight. Once theformal decision to merge has been made, mergers commonly requirean additional year to implement and may take longer, depending onthe associations’ history of precursor activities, complexity, size of theorganization, and risks facing the association partners.

Successful mergers allow the boards, staffs, volunteer leaders, andmembership bodies’ ample time to make the transition. Many organi-zations have found it works most effectively to let memberships andparticular circumstances dictate the tempo of the merger. Flexibletimelines that provide sufficient opportunity for members, staffs, andboards to make the necessary operational, emotional, and physicalshifts are preferred over rigid deadlines. •


Association of Beverage Licensees

FOCUS ON COMMUNICATION

T he single biggest problem in a merger is the beliefthat communication of the merger has takenplace. With pressing timelines and ambitiousgoals, communication with key stakeholders can

take a back seat to other transition details. Associations maylose sight of the fact that various merger stakeholdersapproach the process with differing communication needsand that the content and scope of communications must shiftthrough the various merger stages. If a merger is to be suc-cessful, organizations cannot afford to be inattentive to thecommunication nuances of time, place, and audience.

Stages 1 and 2: Precursor Partnering and Merger Discussions

In the early stages of two associations working together,effective communication involves the establishment of honestand open dialogue between board members or volunteerleaders and key staff executives. Within the core team drivingthe partnering efforts, ongoing communication channels(through meetings, primarily) and norms for the equal sharingof information must be established. There must be a level oftrust between the team members that are planning the merg-er and those involved in the exploratory discussions. It is crit-ical to note that each action and conversation will beconducted in a confidential manner. In addition, at this stage,there must be some agreement among the parties as to howany early rumors will be contained and addressed if and whenthey surface.

Harry Wiles, Executive Director of the Association ofBeverage Licensees (ABL) credits effective communicationbeginning at the earliest stages with the eventual success ofthe 2002 merger between the National Association ofBeverage Retailers and the National Licensed BeverageAssociation. “Informal discussions among a few people in thebeginning helped set the stage. These individuals saw earlyon that the associations could learn a lot from each other andbe stronger and make more of an impact if they joined.”

Stage 3: Merger Negotiations

During the merger negotiation, a number of potential commu-nication pitfalls may emerge. Leaks to external media of animpending merger may occur before the principals are readyto announce any formal agreement. Often, such leaks areone-sided in depicting terms of the agreement or may containerroneous information about the merger elements. Just aspotentially damaging as external leaks are the internal rumorsthat may surface. Employees worry about their ongoingemployment, dislocation and any personal and professionalimpact the merger may have.

Wiles notes that while the internal and external rumor mill maybe an inevitable aspect of the merger process, damage canbe minimized. He notes that it is important to have a plan forhow leaks will be handled and to have a communication sys-tem in place for getting any information that you can releaseout in a timely manner. “The most important thing you can dois to have an inclusive information system. We worked hard togive as much information out as early and as quickly as wecould. We established e-mail distribution of daily news clip-pings, press releases and news items to our members so thatthey would not be caught off-guard. We worked hard to makethe merger process inclusive through the information we dis-tributed on a daily basis to our members.”

Associations may miss the opportunity to accurately tell theirside of merger experience by failing to establish a coordinat-ed plan for release of merger details. When two associationsagree the time is right to formally announce the merger agree-ment, a jointly prepared press release or a jointly held pressconference should answer several of the essential questions.These questions include: the timeframes for the merger tran-sition, key staff, and board (volunteer) leadership of the newassociation, potential member, and public benefits to begained from the merger, and any impacts to existing staff ormembership bodies. Many associations opt to have only oneexternal point of contact for press inquiries to assure that allexternal messages are consistent. Internal groups (boards,staffs, and members) should be advised of the merger agree-ment in advance of or at least concurrent with the publicannouncement. Again, there should be agreement betweenthe associations as to what will be communicated internallyby whom and when.


When organizations move to merger implementation, theneed for comprehensive information and clear instructionsassumes operational importance. Confusion is minimized bydetailed merger timelines and transition documents that spec-ify activities to be completed and who is responsible.

As associations strive to build a new culture for the newlymerged organization, it is important that transition successesare highlighted and challenges of the merger process are dis-cussed openly. Wiles notes that “You have to continually con-vey that the merger has worked. Members must receive aconstant stream of communications and tangible evidencethat things have changed and improved as a result of themerger. You can’t do too much of just assuring that everyonestays in the loop.” •


FOCUS ON TRENDS IN THE EXTERNAL ENVIRONMENTS

A ssociations, like most other social entities, areproducts of their environment, and impacted bythe peaks and valleys of environmental condi-tions. This study demonstrated that three trends

in the external environment consistently lead to the mergeractions of associations.

Decline in Membership

Associations that merged were experiencing contraction intheir membership base. In most cases, membership levelshad shown consistent decline over the past five to 10 years.Association representatives attributed such declines to con-solidation in the broader industry segments they served. Inother words, the potential membership pool for most associ-ations was simply smaller. Association executives understoodthat membership declines had immediate or longer-termfinancial implications for the viability of the organization.

Blurred Services

The delineation between associations serving the potentialmembership pool had blurred. The markets, missions, andservices of competing associations were increasingly similar.Either associations could no longer claim to be offering aunique set of services to their members or the services theyoffered were increasingly viewed as complementary to thoseof another association.

Increased Pressure from Members

Associations found that the first two trends contributed to a

push by members for some organizational consolidation.Members concerned with efficiencies wanted to see more fortheir membership dollars. Duplicative memberships in similarassociations no longer were justified. Further, given that thebase of potential members was smaller, associations couldnot ignore growing member demands to merge their services,trade shows, and organizational structures.

Consolidation and membership declines in the plumbing andheating fixture industry were indeed the impetus for pastmerger talks among several associations. According to IngeCalderon, Executive Vice President of the American SupplyAssociation, as many as five associations considered mergingtheir trade shows and exhibits when memberships dwindledbeginning in the late 1980’s. “As the number of the family-owned plumbing supply businesses declined and potentialmembers decreased by nearly 60 percent, associations sim-ply couldn’t command the requisite number of attendees attheir individual shows. In addition, exhibitors urged some con-solidation as they saw the significant overlap in shows as inef-ficient.”

Manley Molpus, former Executive Director of the GroceryManufacturers Association, attributes the 2001 merger of hisassociation with the National Food Brokers to recognition ofcomplementary markets. “Our associations weren’t competi-tive; we served complementary segments. In addition, therewere a number of synergies to be realized by joining forcesand we could certainly speak with a stronger lobbying voice.Finally, our associations had 42 common members and it onlymade sense from the standpoint of their efficiency and ours,that we look at merging.” •


MERGER RECONSIDERATION: DEAL BREAKERSer to proceed. Potential improvement to the financial bottom line isgenerally an inadequate basis for merging two organizations with vast-ly different objectives.

Lack of Trust and Interpersonal Connection

The absence of trust and interpersonal connections will inhibit a merg-er. People are the heart and soul of a merger. If there is no or too littlebonding between people, then the key actors and the membership willsee little common ground and shared interests among the partners inthe merger.

The Absence of Support and Culture

The absence of supportive actors and culture will disrupt the consum-mation of a merger. In the internal environment, people have to sup-port the idea of change and disruption to their familiar patterns. In theexternal environment, membership bodies, funders and other keystakeholders also must favor collaborative action. If internal or exter-nal stakeholders strongly favor the ongoing independence of one of theassociations, then merger discussions will not succeed.

A Missing Catalyst Leader

The absence of a catalyst leader can be fatal for the merger process.The work entailed in a merger is exhaustive and without a strong indi-vidual to focus and lead the effort, partnering will flounder.

Opposing Cultures andOpposing Players

Absence of Congruent Missions

A Missing Catalyst Leader

Insufficient Time

Lack of Acceptance for Change

The Absence of Supportand Culture

The Absence of PrecursorActivities

Failure to Merge

Merger Deal Breakers

D espite the best intentions and valiant efforts of all parties,merger efforts can fall apart at any time and any pointlong the path from initial discussions through implemen-tation. Why do associations fail to merge? Culprits lie in

the absence of several vital elements and the presence of some com-plex impediments. Some of these complicating factors are environ-mental, others are organizational.

In general, most mergers fail because associations lose sight of thefact that mergers occur between people, not between entities. Peoplehave to see gains for themselves for a merger to take place. At the out-set, people issues, and inattention to people, are the deal breakers. Inparticular, weak leadership, ineffective communication, and cultureconflict are at the root of many failures to merge. In some cases, theculprits lie in initial board or staff indifference to the merger, or teamapathy that arises during the prolonged period of negotiation andimplementation (Davis 20028). Unlike for-profit mergers, board mem-bers do not have a financial incentive to approve a merger and thatmay mean they possess less stamina in facing the merger challenges.For a merger to consummate, the individuals involved must find com-mon or shared interests. When no common ground is found, mergerdiscussions will not succeed (Shinn and Perlov 19979).

Specifically, eight elements can impede merger progress.

Opposing Cultures and Opposing Players

The presence of a major barrier in the form of differing cultures or anopposing player can derail a merger. Failure to understand and recon-cile organizational differences in values, goals, norms, and traditionscan be fatal. Crafting a new order of things within a merged associa-tion generally means taking valuable cultural elements and practicesfrom each organization. Associations that do not successfully mergewill have missed some key cultural touchstone – and that can beeverything from how long-term members are recognized to the nameof the new association magazine.

Individual players also can block a merger. If key association posi-tions leaders (board or staff), have a long history within the organiza-tion, or command respect in some other way, their vocal opposition toa merger may be all that is necessary to thwart the deal. Such individ-ual barriers may be virtually insurmountable without enormous lobby-ing effort on the part of merger proponents or the passage of time.

The Absence of Congruent Missions

The absence of congruent missions of the associations will impede amerger. If there are different interests, it is highly unlikely for a merg-

Lack of Trust and Interpersonal Communication


Insufficient Time

An insufficient discussion period is a hindrance to a successful merg-er. If there is too little time to work through the organizational issuesand build trust among all the parties, people will feel rushed into thedecision, and may sabotage the implementation. Too little time makesthe merger feel like a “shotgun marriage.” A merger in response to acrisis situation rarely works.

The Absence of Precursor Activities

The absence of precursor activities can be an obstacle to a successfulmerger. These activities help introduce key stakeholders and members

to each other. Spending time with other associations and its membershelps familiarize players with each other, their values, mission andwill provide comfort with the idea of partnering. The absence ofshared activities can leave a gap in awareness, familiarity, and trust.

Lack of Acceptance for Change

There should be the perception, if not reality, of high stakes and riskfacing the associations. If people do not believe that the organizationfaces the possibility of demise or significant decline, they may beunwilling to invest the necessary resources to work toward new part-nering arrangements. •


FOCUS ON THE IMPLEMENTATION TIMELINEThe vote has been taken, the legal agreements are signed and all systems are go for implementing the merger. What then?

Roger Dalkin, who headed one of the largest association mergers in history when three bowling associations and their respective mem-berships totaling 2.8 million merged to become the United States Bowling Congress (USBC) in 2005, outlined the implementationprocess that worked for the bowling organizations. While their implementation occurred over a 14 month period, he notes that the stepsare adjustable to the time periods available to and needs of the organization. Key milestones on the USBC transition timeline includedthe following:

Month 1 Month 2 Month 3 Month 4 Month 5

Week 1: Merger transition team is namedand first team meeting held

Merging associations approvespending of transition funds

New association (USBC) is incorporated by legal counsel

Week 2: Application for 501©

(3) submitted

Work on merging informationsystems begins

All Staff meeting held with staffsof all merging associations

Week 4: Merging associations name rep-resentatives to new USBC board

New Board Policy manual sent tonew USBC board members

Work begins on USBC brandingand marketing plan

Week 1: First training session “Preparingfor Merger” is heldfor members

Legal counselfinalizes USBCtrade name

USBC Transitionteam meeting

Week 3: All Staff meeting

Week 4: USBC CEO SearchCommittee formed

Week 2: USBC CEO search begins

USBC Transition team meeting

Week 3: USBC Transition Budget updated

All Staff meeting

Week 1: USBC officiallybegins to operate;including financially

USBC Policy manualcompleted

List finalized oforganizationemployee benefitsto carry forward

Week 2: USBC Transitionteam meeting

New Pension plan isfiled with IRS

USBC logo is final-ized and approved


Week 1: Association“Consolidation/Merger/Transition”training session


First USBC financial statements distributed

National Boardreviews 1/05 – 7/05budget


Month 6 Month 7 Month 8 Month 9 Month 10

Week 1: Updating of due diligence begins

Work begins on consolidation ofprocesses

Week 2: USBC Transition team meeting

USBC is presented to USOCRegulatory board for approval



Final board meet-ings of all formerassociations held

Final newsletters ofall former associations sent

Work on USBCbranding and marketing planfinalized


Week 1: Legal counsel delivers updated duediligence reports

List finalized of organization pro-grams/services to carry forward

Vendors notified of organizationalchanges


USBC Transition team meeting

Week 3: USBC CEO hired

USBC Board elects NominatingCommittee

Week 4: Legal counsel prepares final filingsrelating to association closings

New organizational structure andexecutive team in place

Merger is closed and former associations cease to exist

Employee transition is complete

USBC signage in place inside andoutside buildings

Week 1: Merger takes effect

Association beginsto operate accordingto new by-laws

Revised bowl.com islaunched

USBC brand is“unveiled” at head-quarters mediaevent

Week 2: Last separate finan-cial statements aredistributed

Legal counsel completes the registration of USBCname and logo

Week 3: First merged USBCfinancial statementsdistributed

First USBC membernewsletter mailed

Month 11 Month 12 Month 15

Week 2: Membership cards reissued con-taining USBC logo

Week 2: First USBC Annualmeeting held

Week 2: All consolidation of information sys-tems complete


H ave you ever seen anyone try to bake a cakewithout cracking an egg? It frequently happenswhen associations decide they want some typeof organizational change but without changing

anything. Everyone agrees with change as long as it does notaffect them personally. In an organizational transformation asmonumental as a merger, leaders provide the essential ingre-dients to move talk to action. There must be an individual anda group of people who catalyze the work. The personal char-acteristics they bring to the table are critical in every stage ofthe process.

Critical Characteristic – Key Leadership

In considering the merger deal, the key leadership character-istic is one of foresight. The leader is forward looking andattuned to the changing environment and its importance.These individuals detect the critical shifts in the market andindustry and are not unduly bound by past precedent. Further,they are able to communicate the relevance of the environ-mental changes for the association.

Critical Characteristic – Decisiveness, Creativity, and Interpersonal Savvy

When negotiating the merger deal, leaders exhibit decisive-ness, creativity, and interpersonal skills to craft an arrangementthat best serves the association and its members. In making thedeal, leaders are the catalysts that are intent on making themerger happen, irrespective of their personal gains or losses.Along the way, leaders frequently face criticism and resistance,bewilderment and skepticism. Yet, the leader, often supportedat this stage by a group of like-minded individuals, is commit-ted to seeing the merger become a reality.

Critical Characteristic – Catalyst Leader

While implementing the merger, the leader serves as chiefchoreographer. Together, the catalyst leader and the groupwork the merger plan. The leader shepherds the implementa-tion work, attending to both the tasks and the interpersonalaspects of the merger. While there is focus on implementationspecifics, there is recognition that building bridges and trustamong the people involved is as important as the tacticalcombining of operations.

Cases reviewed in this study emphasize the essential leader-ship element in forging mergers. In the merger of the BatteryCouncil International (BCI) and the Independent BatteryManufacturers Association (IBMA), three board memberswere uniquely attuned to industry shifts. Having witnessed adecline in the number of battery manufacturers from 300 to 30over a period of 30 years and increased duplication in mem-bership between the two associations, current BCI BoardPresident Hal Hawk says he and two other board membersagreed it was time to read the painful writing on the wall. “Wesimply identified the changing environment and recognizedthat we would need to change the association or close it.”Former board member Randy Hart agrees that the role of theleadership team was to “get board members to understandwhat they already knew on some level.” Redundant organiza-tions, lost membership, lost relevance were all signals forchange that these leaders paid attention to. These boardmembers then put the decision to the rest of the board in away that was frank and necessitated action.

Once they had built board recognition of the changed exter-nal environment and the inevitability of change, the attentionof the BCI leadership team shifted to merger implementationand the work of due diligence. Hawk says that four peoplehad primarily responsibility for effecting the merger throughclear assignment of tasks. Frequent communication betweenthese four individuals was critical. “Every board member knewwhat they were there for. I was the planner in the merger, andRandy was the facilitator in getting everyone on the samepage. Others had key roles. And we were all like-minded inthat we would make it work or close it down.”

In the end, Hart, Hawk, and Board Member Jim Douglas agreethat the success of the merger was a function of the rightcombination of factors. “We simply had the right leaders atthe right time to advance the right thing,” says Douglas. “Suchdecisions are not easy, particularly when you’re talking aboutorganizations that have been around since before I was born.”But when the merger was complete, Hawk notes that “Wewere applauded for making the decision and not waiting untilassets of the associations were further depleted. We wound itup with the association in good health and on our terms.” •

Battery Council International

FOCUS ON LEADERSHIP


LEGAL CONSIDERATIONS

O nce association leaders approve the idea of a merger, theinvestigative process of due diligence will then begin.The purpose of due diligence is analyze your risk. Duediligence is an exercise that examines the business,

financial and legal aspects of the involved organizations to uncoverany risks which would frustrate the intended goals of the transaction.Conceptually, a merger between two associations can make a lot ofsense. However, association leaders are best positioned to make athoroughly informed and intelligent decision to approve a mergeronly upon the completion of the due diligence process.

Given the number of outside professionals which are typicallyretained, due diligence can be an intimidating and frustrating exer-cise. The exercise should be embraced by leaders as a structure tohelp preemptively manage issues which could arise after the mergeris complete. It is easy for leaders to think at a high level about thebenefits of joining two or more associations together. However, it iscritical to also pay attention to the significant effects which ripplefrom the merger of two separately operating organizations.

One of the first areas to examine is the projected financial health ofthe merged, or surviving, entity once the transaction is completed.Despite all other logic in two groups completing a merger, it makeslittle sense to move forward with a merge if the surviving organiza-tion is not going to be financially sustainable. As a result, financialforecasts typically need to be prepared and reviewed very early inthe due diligence process.

Decisions about office space, property, equipment leases, and otherinfrastructure components will typically be made as a result of duediligence discoveries. In addition to evaluating functionality and aes-thetics, consideration to continuing contractual liabilities will be afactor in those decisions. These just begin the list of agreementswhich a prudent due diligence team will evaluate during thisprocess. That list continues with those contracts involving vendors,employees, contractors, software licenses, intellectual propertyrights, work-for-hire, non-disclosure agreements, and those codify-ing the settlement of a lawsuit. Every material agreement to whicheither merging association is a party should be reviewed to not onlyassess the impact of the merger, but also to inventory the legal andfinancial commitments for which the surviving entity will be respon-sible. It is critical to keep in mind that a merger is not a typically aterminating event of a binding agreement. Even if the actual associa-tion who is a party to the contract ceases to exist after the merger,the obligations of that association will likely be assumed by the sur-viving organization.

Considerable attention must also be paid to employment issues duringdue diligence. A thorough analysis of both contractual and statutory

rights of the employees affected by the merger, particularly those thatmay be terminated because of it, must be performed to avoid the riskof lawsuits. Benefit plans need to be properly managed to ensureemployees’ expectations of continuing coverage are met as they maymove from one sponsoring employer to another. Managing issuesinvolving the merger or termination of multiple qualified retirementplans can be particularly thorny due to the legal intricacies which gov-ern those plans.

Due diligence will assess whether the merging associations havefully abided by all government compliance requirements withrespect to annual reports, foreign business authority, licenses, IRSand state tax filings, and the administration of benefit plans. In theseareas, it is particularly important the merging groups have all their“i’s” dotted and “t’s” crossed before the merger is complete. Theforced review required by due diligence on these items is actually afantastic way to discover unintended compliance failures of the pastso they may be proactively corrected.

Pending or threatened lawsuits, or claims of any kind by outside par-ties, must be fully disclosed. The types and amounts of insurancemaintained by each association needs to be evaluated and properlymanaged so that seamless coverage extends to the surviving entitypost merger. Financial controls, human resource policies, and allother internal procedures involving the business administration of theorganization are also typical subjects of due diligence discussions.

Due diligence review will also ensure the steps taken by associationleaders to approve and finalize a proposed merger are done in com-pliance with each group’s governing documents (bylaws) and in thebest interests of its members and constituents. However, attention togovernance does not end there. Establishing a governance structurefor the new association will also be an important dialogue betweenleaders prior to the merger implementation.

At the end of the day, due diligence is about avoiding surprises. Twoseparately existing organizations which have no prior understandingof the other’s intimate business and legal affairs utilize due diligenceas an educational tool to uncover and scrutinize the risks which willthey will face as a joined entity. In many instances, the risks areopenly discussed so that they may be properly managed. In otherinstances, risks may be so profound that leaders may ultimately con-clude it may not make sense to complete the merger. In either case,due diligence helps association leaders make an informed and intel-ligent decision about a merger’s approval. It is in many respects, atool for those leaders to perform the fiduciary duties required ofthem by law. •


FOCUS ON TIME NECESSARY TO BE SUCCESSFUL

M uch has been written about the importance of timein any kind of organizational transformation. Forassociations – time, and its appropriate allocationto the various stages of a merger, can be the dif-

ference between a merger that works and one that does not.

Stage 1: Precursor Partnering

The personal and organizational relationships upon which anymerger will be built must have sufficient time to mature anddeepen. Of the associations studied, those organizations thatspent time getting to know each other and developing expe-riences working together in preliminary yet meaningful ways,had greater success in merging than those with little or noprecursor partnering. Among those that consummated theirmerger, the average period dedicated to precursor partneringactivities was approximately 4.75 years. For those that did notconsummate their mergers, only one of the associations hadengaged in any precursor partnering activities.

Klein Merriman, executive director of the National Associationof Store Fixture Manufacturers (NASFM) says that an extend-ed period of early partnering was crucial to the eventual merg-ers of NASFM and the National Association of DisplayIndustries (NADI). In 2000, NADI leaders approached NASFMabout assuming some administrative functions for their asso-ciation. This proposed partnering required that individualswork closely together and share key information about theirrespective organizations in order that the transfer of responsi-bilities did not degrade member services. “In the process, wehad to understand their operations, their structure, their mem-berships, and a myriad of other intimate details about eachother.” They found that this early “getting to know you” peri-od had pay-off when they progressed to merger discussion,formal negotiation, and implementation. Working togethersuccessfully for a period of three years through the adminis-trative services agreement, enabled the organizations to buildfamiliarity and trust which eventually made the process ofmerging markedly easier, more efficient and expeditious.

Stages 2 and 3: Merger Discussions and Formal Negotiations

It has been said that to think too long about doing a thingoften becomes its undoing.

Unlike the first merger stage of precursor partnering wheretaking ample time has long-term benefit, the associationsstudied that had successfully merged showed that mergerdiscussions and negotiations must proceed apace.

Certainly, the idea of merging has to have to time to germi-nate. Hal Hawk of the Battery Council International (BCI)explains that the 18 month period before the merger ever

became a formal proposal enabled the battery associations toconsider the what ifs, perform the implicit cost-benefit analy-ses of merging, obtain the reactions and preliminary supportof the principals and consider the future scenarios of amerged association.

Yet, too much time in this period can allow uncertainty anddisagreement to set in. “If we waited too long, people wouldbegin to get nervous about how it would impact them person-ally and less about the consequences for the association.Staying in this stage long enough to make an intelligent deci-sion, but not so long as to become fixated on the operationaldetails is key.” Likewise once the decision to merge hasmoved beyond informal agreement to serious negotiation,associations should strive to move deliberately, efficiently andeven expeditiously through the negotiation stage.

Of the associations studied, those who lingered too long indiscussions and negotiations often found that the mergerprocess broke down. Deterioration of the process at thisstage happens for a number of different reasons. Leadershipmay change, compelling reasons for the merger may loseurgency or be forgotten, and legal, administrative, or manage-rial complications may assume disproportionate importance.

Among the associations studied that had merged, the aver-age period they reported in the merger discussion stage was12 months; the average period of formal negotiations was 6months. For those that did not merge, they spent a muchlonger period of 3.25 years in merger discussion, and a some-what shorter period of three months attempting to formallynegotiate the merger. Merger leaders that can strike the rightbalance between a competent due diligence effort and anexpeditious timeline for merger approval, stand a betterchance of moving the process to implementation.


So how long does it take to make a merger plan a reality? Theanswer is a function of the size, scope, complexity, geogra-phy, and leadership of the organizations. For those associa-tions studied that eventually merged, an average of 18months was spent in the implementation stage.

Again, Hawk notes that the implementation period shouldtake no longer than necessary. “Implementation is a period ofinstability and uncertainty. The sooner you can label theimplementation as complete, the faster people can begin toassimilate and accept the change.” He suggests that theprocess should be long enough to accomplish three purpos-es — to assure that all major structural and operationalchanges have been made, to communicate the rationale andmerit of the idea of merging, and to give key stakeholders anopportunity to play a role in the transition. •


M ergers are difficult endeavors and a reasonable ques-tion associations must ask is, are they worth the effort?For those associations facing significant challenges inthe form of declining memberships, industry consoli-

dation and efficiency pressures, the research revealed that mergers canbe a valuable strategic option at times when other, less options fallshort in delivering real change. For mergers to work, the motivations,methods, and management of the process must be right. Organizations

must give due considerations to their reasons for merging, the essen-tial ingredients for joining forces and their goals for the newly mergedorganization. By doing so, they stand a greater chance of achieving amerger arrangement all will consider successful. If, over time, formerorganizational lines fade away, a common vision for the futureemerges, and better practices for meeting the needs of clients andcommunities are developed, the merger will have proven it was indeedworth the investment of organizational effort. •

CONCLUSIONS

Success Factors in Association Mergers

Leadership

Social Capital Retention of Culture

Precursor Partnering Merger Discussions Formal Negotiations Merger Implementation

Communication

Appropriate time


1 Taylor, R. (2000). “Tying the Knot: Association Mergers.” Executive UpdateDecember: 106-109.

2 Kohm, A., La Piana, D. and Gowdy, H. (2000). Strategic Restructuring:Findings from a Study of Integrations and Alliances among Nonprofit SocialService and Cultural Organizations in the United States. Chicago, Illinois:Chapin Hill Center for Children.

3 Taylor, R. (2000). “Tying the Knot: Association Mergers.” Executive UpdateDecember: 106-109.

4 Prokuski, B. (2002). “Anatomy of a Merger.” Association Management.February :43-48.

5 Social Entrepreneurs Inc. (2005). Nonprofit Mergers: A Primer for NonprofitLeadership. Retrieved December 8, 2006 from http://www.socialent.com.

6 Prokuski, B. (2002). “Anatomy of a Merger.” Association ManagementFebruary: 43-48.

7 Linden, R. (2002). Working Across Boundaries. San Francisco:Jossey-Bass Publishers.

8 Davis, J. (2002). Bridging the Organizational Divide: The Making of aNonprofit Merger. Boston, Massachusetts: NonprofitReinvestment Corporation.

9 Shinn, L., and Perlov, D. (1997). Strategic Mergers: How to Avoid Snags inthe Merger Negotiation Process. Retrieved October 9, 2006 fromhttp://www.virtualcmg.com.

10 Patton, MQ (1990), Qualitative Evaluation and Research Methods. London:Sage Publications.

11 Miles, M.B. and Huberman, A.M. 1994. Qualitative data analysis: A source-book of new methods. Thousand Oaks, California: Sage Publications.

12 Creswell, J. (1998). Qualitative Inquiry and Research Design. Thousand Oaks,Ca.: Sage Publications.

13 Yin, R. (1994). Case Study Research: Design and Methods. Thousand Oaks,California: Sage Publications.

REFERENCES


T he following publications are listed because they were usedin preparation of this report. While they are not necessarilyof much direct use to association professionals, readers mayfind them to be intellectually stimulating.

Arsenault, J. (1998). Forging Nonprofit Alliances. San Francisco:Jossey-Bass Publishers.

Austin, J. (2000). The Collaboration Challenge: How Nonprofits andBusinesses Succeed Through Strategic Alliances. San Francisco:Jossey-Bass Publishers.

Dickey, M.. (2002). “Helping Employees Get Through a CharityMerger.” Chronicle of Philanthropy 14(18).

Drumwright, M., Cunningham, P., and Berger, I. (2000). SocialAlliances: Company/Nonprofit Collaboration. Cambridge, MA:Marketing Science Institute.

Golensky, M. and DeRuiter, G.. (2002). “The Urge to Merge: AMultiple-Case Study.” Nonprofit Management and Leadership13(2):169-186.

Golensky, M. and DeRuiter, G.. (1999). “Merger as a StrategicResponse to Government Contracting Pressures: A Case Study.”Nonprofit Management and Leadership 10(2):137-152.

Guo, C. and Acar, M.. (2005). “Understanding Collaboration AmongNonprofit Organizations: Combining Resource Dependency,Institutional, and Network Perspectives.” Nonprofit and VoluntarySector Quarterly 34(3): 340-361.

Kohm, A. and La Piana, D. (2003). Strategic Restructuring forNonprofit Organizations: Mergers, Integrations and Alliances.Westport, Connecticut: Praeger.

Kohm, A., La Piana, D. and Gowdy, H. (2000). StrategicRestructuring: Findings from a Study of Integrations and Alliancesamong Nonprofit Social Service and Cultural Organizations in theUnited States. Chicago, Illinois: Chapin Hill Center for Children.

La Piana, Hyman V. (editor) (2002). The Nonprofit Mergers Workbook:The Leader’s Guide to Considering, Negotiating, and Executing aMerger; Amherst H. Wilder Foundation.

La Piana, D. (1994). Nonprofit Mergers: The Board’s Responsibility toConsider the Unthinkable. National Center for Nonprofit Boards (nowBoardSource).

FURTHER READINGLinden, R. (2002). Working Across Boundaries. San Francisco: Jossey-Bass Publishers.

Luton, L. and Grubbs, J. (2000). “Can Agencies Work Together?Collaboration in Public and Nonprofit Organizations.” PublicAdministration Review 60(3): 275-281.

Marks, M. and Mirvis, P. (1998). Joining Forces. San Francisco:Jossey-Bass Publishers.

McCormick, D. (2001). Nonprofit Mergers: The Power of SuccessfulPartnerships. Gathersburg, Maryland: Aspen Publications.

McLaughlin, T. (2000). Trade Secrets for Nonprofit Managers. NewYork: John Wiley & Sons.

McLaughlin, T. (1996). Nonprofit Mergers and Alliances: A StrategicPlanning Guide. New York: John Wiley & Sons.

Pietroburgo, J. and Wernet, S. (2004). “Joining Forces, Fortunes andFutures: Restructuring and Adaptation in Nonprofit HospiceOrganizations.” Nonprofit Management & Leadership 15(1): 117-137.

Schmid, H. (1995). “Merging Nonprofit Organizations: Analysis of aCase Study.” Nonprofit Management & Leadership 5(4): 377-391.

Singer, M. and Yankey, J. (1991). “Organizational Metamorphosis: AStudy of Eighteen Nonprofit Mergers, Acquisitions, and consolida-tion”. Nonprofit Management & Leadership 1(4): 357-369.

Stone, M., Bigelow, B., and Crittenden, W. (1999). “Research onStrategic Management in Nonprofit Organizations: Synthesis, Analysisand Future Directions.” Administration and Society 31(3): 378-423.

Toepler, S. Seitchek, C. and Cameron, T. (2004). “Small OrganizationMergers in Arts and Humanities.” Nonprofit Management andLeadership 15(1): 95-115.

Wernet, S. and Jones, S. (1992). “Merger and Acquisition Activitybetween Nonprofit Social Service Organizations: A Case Study”Nonprofit and Voluntary Sector Quarterly 21(4): 367-380.

Wymer, Walter W. and Sridhar S. (2003). Nonprofit and BusinessSector Collaboration. Binghamton, N.Y.: Best Business Books.

Yankey, J., Jacobus, B., Koney, K. (2001). Merging NonprofitOrganizations: The Art and Science of the Deal. The Mandel Center forNonprofit Organizations. •


T he research design for this study employed qualitativeinterviews with associations’ personnel. Data was derivedthrough multiple-case, telephone and face-to-face inter-views. Cross-case analysis offered the advantage of com-

paring the rich detail of cases involving consummated andunconsummated mergers. The study was qualitative-descriptive in itsnon-statistical comparison of the two respondent groups (i.e. thosethat merged and those that considered but did not merge).Triangulation entailing the use of multiple data sources afforded theresearchers the opportunity to test for multiple explanations and toeliminate competing explanations (Patton, 199010).

Snowball sampling was utilized to identify associations for inclusionin this study. Each member of the William E. Smith Institute forAssociation Research Leadership Council was asked to supply a listof associations of which they were aware that had engaged in a merg-er or consideration of a merger in the past three years. Council mem-bers also were asked to identify consultants who served as anadditional source for associations to be studied. Finally, select associ-ation media from the past three years were scanned for potential studyparticipants. These three snowball samples were reconciled to identi-fy a common core of associations that merged or had engaged in dis-cussions of mergers. From this refined list, criterion sampling wasemployed for selecting the participating associations. Specifically, 11associations were selected over two phases of the project. Seven of theassociations had been involved in a completed merger within the pastfive years, and four associations had considered or attempted mergingbut chose not to go forward within that same time period.

The Phase 1 research involved study of seven trade and professionalassociations and focused upon generating understanding of andhypotheses about association mergers. Four interviews were attempt-ed for each merger case: one with each of executive directors of theassociations involved in the merger transaction or discussion (2) andone with each of the board presidents involved in the merger transac-tion or discussion (2). The Phase 2 research involved study of an addi-tional four associations and tested the earlier findings regarding

association mergers, and failures to merge, especially as they appliedto professional associations. For each Phase 2 merger case, one inter-view was conducted, and it was with the staff person of the associa-tion. Phase 1 and 2 interview questions were both semi-structured andopen-ended. These questions encouraged participants to identify a)factors motivating merger decisions; b) processes involved in themerger negotiations; c) factors impeding merger decisions; d) deci-sion-making capacity within the organization; and e) strength ofresource bases. Each interview required approximately 90 minutes.

Subject recruitment was carried out via electronic or surface mailingof an introductory letter explaining the study. Potential participantswere contacted by phone regarding participation. The only incentiveprovided to participants was promise to provide a copy of the studyresults that may be useful to their own consideration of mergeroptions. No other incentives were used.

Data analysis for this study began with data management (organiza-tion and conversion of data into an accessible form), proceeded toreview of data to identify major organizing ideas, and then entailedclassification of data into overarching categories, themes, and dimen-sions of information. Interpretation involved making sense of the databy stepping back and forming larger meanings of emergent datathemes. The cases were analyzed through an iterative process (Milesand Huberman 199411). As key patterns emerged, the data wasreduced to isolate and illustrate prominent factors.

Taxonomic and componential models were useful in this process(Creswell 199812). In addition, pattern matching for rival explanationswas employed to facilitate the comparisons of empirically based pat-terns emerging from the qualitative data with predicted patterns(Yin 199413). Each of the cases was known to have a certain type ofoutcome: merger and consideration of merger without action.The study focused on how and why the varied outcomes occurred.The goal was to determine if a pattern of mutually exclusive inde-pendent variables existed with each of the respective outcomes. •

RESEARCH METHOD


Julie A. Pietroburgo is an assistant professor in the Department ofPublic Administration and Policy Analysis at Southern IllinoisUniversity where she teaches public and nonprofit budgeting,fundraising, and marketing and public relations. ProfessorPietroburgo is presently conducting research in the area of strategicreorganization of nonprofit organizations. Professor Pietroburgoworked for fifteen years for Southwestern Bell Corporation in theareas of government relations and strategic planning.

Stephen P. Wernet is a professor in the School of Social Work in theCollege of Public Service at Saint Louis University where he teachesnonprofit and social work administration, and evaluation research.Professor Wernet was a Fulbright Scholar at Ostrava University,Ostrava, Czech Republic in Fall 2006. His research focuses on orga-nizational change and adaptation of nonprofit organizations with par-ticular interest in mergers, acquisitions, joint ventures and strategicalliances. Professor Wernet recently coauthored Cases in MacroSocial Work Practice. Third Edition. (Allyn and Bacon Inc, 2008)with David P. Fauri and F. Ellen Netting. •

ABOUT THE RESEARCHERS


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