May 30, 2011 | Read Time: 8 minutes
Late one night in January last year, Audalee McLoughlin, a nonprofit chief executive, received a call she considered a godsend.
The other person on the line asked, “Are you interested in a merger?”
Ms. McLoughlin said yes without hesitation. “That’s exactly what I’m interested in.”
New Moms, the 28-year-old Chicago organization she heads, had been looking for a way to get jobs for troubled teenage mothers, and Bright Endeavors, a Chicago nonprofit that started operations three years ago, provides job training to teenagers. The groups had already been working together as community partners for the cause, with some New Moms clients participating in the Bright Endeavors candle-making and -selling business, but the arrangement was informal.
Ms. McLoughlin was eager to offer that kind of job preparation. And she knew her group’s fund raising would stall in the bad economy unless it could offer such a service. Five months after the call, the groups united.
“It gave us another tool to say that we’re able to move our moms from multigenerational welfare to contributing members of society and to be great parents.”
Drop-Off in Donors
As more groups consider mergers as a way to cope with the bad economy, many of them are doing so not just to reduce duplicative costs but also to give their organizations a stronger fund-raising foundation.
But what often happens, typically in the first year or two, is that some donors no longer feel attached to the new group or they are confused by a new name.
What’s more, some are often so impressed by the reduction in duplication made possible by the merger that they cut the total amount that they previously gave, especially if they were supporters of both of the merging organizations.
And perhaps most troublesome, some board members may leave as part of the merger. That often means an immediate loss of big gifts from trustees and the people they solicit.
“Generally, what we find is that it takes a good 12 to 18 months post-merger for organizations to begin to see a bump up in fund raising,” says Jo DeBolt, a senior manager at La Piana Consulting, a Mars, Pa., company that specializes in helping nonprofits merge.
‘Growing Pains’
Ms. McLoughlin, of New Moms, says the first year has indeed been a fund-raising challenge. At the end of last year, a staff member sent Ms. McLoughlin an e-mail saying that Bright Endeavors supporters didn’t get their year-end appeals. It turned out that nobody had merged the database of donors from both groups, so a lot of mailings went to only one set of donors.
“That’s some of the growing pains of the merger,” Ms. McLoughlin says. “That probably was the one that I grieved the most because those were lost opportunities and feelings were hurt by it. People were feeling that they weren’t important.”
Still, the merger has already brought in new money to the group.
In the year before the merger, New Moms raised $1.9-million, while Bright Endeavors generated $118,000 in donations and sales of products manufactured by its job trainees.
Since the merger, New Moms has received two additional government grants and one corporate contribution, totaling $175,000. Overall, Ms. McLoughlin says, the merged organization is better nine months into its fiscal year than either organization would have been on its own.
Diversified Approaches
What makes some mergers so advantageous is the chance it gives groups to diversify their sources of support in ways they couldn’t have done before because of staffing or other limitations.
The Wellness Community and Gilda’s Club Worldwide, which united in July 2009 to become the Cancer Support Community, relied on completely different fund-raising approaches. The Wellness Community counted on grants from foundations and companies, while Gilda’s Club raised most of its money from individuals.
But blending those approaches is working well, says Kim Thiboldeaux, president of the Cancer Support Community (who was chief executive of the Wellness Community before the merger).
While the Wellness Community had never held a national gala before, Gilda’s Club has done so successfully.
With a combined donor pool that was much bigger than Gilda’s Club had ever had, an April fund-raising event for the Cancer Support Community, with the comedienne Lily Tomlin as host, attracted 300 people—twice as many as the year before. The event is expected to bring in about $500,000 when the final proceeds are tallied.
“Donors love the efficiency,” Ms. Thiboldeaux says. “They get a little bit frustrated with the redundancy that exists.”
The Cancer Support Community has also benefited from new opportunities to collaborate with corporations.
It has been named a beneficiary of a Lee Jeans “National Denim Day” campaign, an annual cancer fund-raising effort in October that urges employers to let workers wear jeans to work if they make a donation.
“Cause-marketing opportunities such as this are only going to unfold in front of us,” says Ms. Thiboldeaux, who expects to receive a six-figure check from the campaign. “It happened because of the merger, and it’s brand new for us.”
‘One Plus One Equals 11’
While mergers can please donors, some nonprofit officials are so nervous about an alliance that they fail to tell donors until late in the process.
Executives at Compas and Young Audiences of Minnesota tried to avoid that problem by reaching out to major donors, corporations, and foundations before the two groups completed a merger two years ago. They asked their supporters what they thought about a possible merger.
“The words we were using were one plus one equals 11,” says Bob Olsen, executive director of Compas, which stood for Community Programs in the Arts and Sciences.
So far, donations have barely dropped below the amount each group raised when it was on its own. “We haven’t lost much,” Mr. Olsen says. “I guess, in a recession, that’s good.”
After a merger, a slow, measured approach to seeking support may be wise, charity leaders say.
Youth Villages, in Memphis, raises about $15-million a year and has won support from national foundations to expand its work helping kids avoid foster care. In September 2009, it took over Inner Harbour of Douglasville, Ga., which had a similar mission but had faced trouble meeting payroll.
Once they decided to merge, Youth Villages officials sat down with the foundations that had been supporting Inner Harbour to reassure them that their previous grants would stay in Georgia and to go over the merits of combining the groups.
Richard Shaw, chief development officer at Youth Villages, explained his group’s plans to renovate some of Inner Harbour’s facilities and invest in its technology. But he has deliberately avoided asking those foundations for more money to give them time to get better acquainted with the charity.
In Memphis, Youth Villages holds an event in February called “Soup Sunday,” for which restaurants donate food. The event brings in up to $100,000 a year. But the group is not planning that for Atlanta, at least not yet. Its primary goal is to “learn this community and see what works best,” Mr. Shaw says. “Every market is a little bit different.”
Building a strong local board was essential, too.
“At the end of the day, you can get great development staff, but if you don’t have a strong contingent of civic, business, and local leaders engaged in your mission, it’s going to be hard to do fund raising,” Mr. Shaw says.
Instant Success
While most nonprofit organizations don’t get an instant boost from collaborating, some have.
The Central Virginia Food Bank and the Meals on Wheels program in Richmond, Va., were each seeking to build a commercial kitchen when they realized it would be better to team up and build just one. They brought up the idea with donors.
“The donors loved it,” says Fay Lohr, president of FeedMore, the umbrella organization that was formed to absorb the two charities. “We were able to right off the bat save some money and get funded by donors.”
The merged group raised $7.6-million. It built a kitchen for $4.7-million, leaving money to buy equipment and technology, pay start-up expenses for the kitchen, make repairs to a warehouse roof, and put $1-million in its endowment.
Donors also demonstrated support for the merger by donating a record $10-million in the first year, allowing the board to establish a six-month fund it could tap if it faced an emergency.
Before the merger, Meals on Wheels raised $1.9-million in cash, while the Central Virginia Food Bank raised $2.4-million.
So far this fiscal year, from July through April, FeedMore has raised $6.3-million.
One reason the groups are raising so much more is that they now have more donors than either did on its own. The year before the Food Bank and Meals on Wheels combined their efforts, they had a total of 16,697 donors. Four years later, in 2010, they had 25,803 supporters.
“The community stepped up,” says Ms. DeBolt, the mergers consultant. “They are supporting FeedMore.”
How to Ensure a Merger Will Increase Donations
• Seek out merger partners with complementary fund-raising approaches. For example, if one organization focuses on raising money from individuals and the other relies primarily on foundation grants, that’s a benefit. If fund-raising strategies are too similar, there’s a possibility of losing support.
• Inform donors early and often. Don’t get nervous about talking to donors too soon about a merger. It helps avoid misunderstandings, experts say. Waiting until late in the process may leave donors feeling misled or left out.
• Be patient. It takes a year to 18 months after a merger to see a bump in fund-raising, since the charities need to integrate programs and missions before they focus on raising money, says Jo DeBolt, a senior manager at La Piana Consulting.
• Show results. Tell donors about cost savings achieved with a merger or the increased ability the merged organization has to help people. And show donors that they need to continue to give as much as they once did to allow the group to continue doing a good job in meeting its mission.
