The urge to merge - part 2. Why mergers fail.

In this 3 part series on mergers, we’re exploring the nature of mergers, why your organisation might consider merging with another, and why it might not be such a good idea. 
As with any kind of collaboration, the planning and strategising stage are crucial to a successful merger.  

In the for-profit sector, two thirds of mergers fail to meet expectations. The most prominent reasons why mergers fail include:

Lack of rigorous strategic thinking regarding purpose. 
Stop and ask – what is the purpose of both entities who plan to merge or collaborate? Are these aligned with each other? Why exactly are you collaborating and how does each party expect to benefit? 
Asking a few simple preliminary questions around purpose will ensure that you’re both on the same page from the very beginning, saving many headaches and tension later down the track. 

Negotiations souring if the culture of the merging parties is too different. 
It’s true that culture eats strategy for breakfast. If the Boards are too culturally different, reconsider your need to merge and look at other forms of collaboration.

Get rid of it, there’s no room for ego in any organisation let alone a NFP. If you think your identity is at risk from a merger, perhaps senior staff are safeguarding their own or organisational status. Always keep in mind that it’s about what is best for the clients of both organisations. 

The merger is reactive. 
Beware if your organisation is merging to escape financial distress or fix leadership vacuum, rather than for proactive reasons such as scaling up, increasing productivity, leveraging off others skills or doing something better together. 

Brand identity is lost. 
Brand is integral to NFP culture. A strong brand equals strong NFP – board, funders, staff, volunteer loyalty and beneficiary trust. Brand stewardship can derail mergers; NFP mergers try to preserve brand equity. 

Success factors that will help favourable mergers include: the right values from both parties; client-driven objectives; strategy driving structure; proper due diligence; and a post-merger integration planning beginning early, at outset of negotiations.


We’ve just touched on a few key points- of course there are many more factors to consider and questions to ask.  In Part 3, we’ll talk to a senior NFP leader who has personally been through the process of merging organisations.