Minnesota Business Mergers Could Chill Gifts, Report Says

A growing number of mergers and acquisitions involving Minnesota businesses

may pose a threat to the tradition of companies in the state giving generously, according to a new report.

The report, based on interviews with 63 business executives and nonprofit leaders was prepared by the Center for Ethical Business Cultures, a nonprofit organization in Minneapolis that advises companies.

The number of mergers valued at $1-million or more involving Minnesota companies grew from 82 in 1992 to 332 in 2000, the report said. And, in the last three years, the report says, 14 of the state’s 20 largest companies acquired, merged with, or were acquired by out-of-state businesses.

That trend, the report says, may jeopardize the “Minnesota Way” — described in the report as the expectation that businesses and business leaders in the state will be actively engaged in giving and volunteering. Companies in Minnesota, for example, started the first Five Percent Club in 1976, encouraging businesses to donate to charity 5 percent of their pre-tax profits. The national average for charitable giving among major corporations, according to the report, is 1.2 percent.

Nonprofit officials are much more concerned about the potential effects of mergers on corporate philanthropy than are business leaders, the report says. Among other worries, charity officials say donations are likely to shrink when two businesses that had each contributed to charity become one company.

Corporate officials, on the other hand, are likely to believe that mergers can strengthen businesses, thus increasing their financial capacity to make charitable contributions. And, they say, changes in corporate-giving habits are more likely to be influenced by other factors, such as whether or not companies choose to focus on cause-related marketing, a strategy intended to tie a company’s identity to a charitable cause through joint marketing deals.

The report includes a list of actions corporate-giving officers can take to smoothly combine the giving programs of two merging businesses, and best allay the concerns of the charities that each company supports.

The report, “Mergers: Implications for Corporate Philanthropy and the Community,” can be found on the Center for Ethical Business Cultures’ site, at http://www.cebcglobal.org. For more information, contact the center at 1000 La Salle Avenue, M12, Minneapolis, Minn. 55403-2005; (651) 962-4120.