6 Common Merger Pitfalls and the ELEPHANT IN THE ROOM
In Australia’s not-for-profit sector, mergers are increasingly seen as a strategic way to build resilience, increase impact, and respond to sector-wide pressures. Yet, while mergers offer promise, many fail to launch—or falter soon after—due to common and often avoidable pitfalls.
Here, we explore the most frequent traps not-for-profits fall into during merger discussions and how leadership teams can steer through them with clarity, courage, and foresight.
1. Don’t know where to start
Logic and vision suggest that a merger is a smart solution to your challenge – whether that be scaling up your impact, or getting out of a tricky situation. BUT you have no idea how to approach it, how long it takes, what’s involved, how much it will cost, what needs to be in place, or where to start. We get it – it’s a lot (particularly on top of business as usual and with your own challenges to address). That’s why we created the FREE Merger Readiness Assessment – to give you an idea where you are, and how to get moving.
2. Lack of internal alignment
The word merger can be divisive. We know of people who refuse to utter the word. In The Arthritis Movement we could only talk ‘Collaboration’ for the first year of working together. ‘Merger’ only entered our lexicon when the benefits became irrefutable.
Maybe some people think considering a merger is to admit defeat – that you can’t solve your unique challenge(s) yourself. Maybe they think potential merge partners are evil or incompetent, or not to be trusted. Maybe some people’s own identities and interests are so locked up with the organisation and the status quo that they can’t countenance looking outside or at alternatives to going it alone. Maybe the “sunk cost fallacy” is at play – when so much hard work and time has gone into “your” organisation, the idea of alternative approaches is anathema and despite a clear path, others refuse to see it.
But YOU are focused on client outcomes – and Vision – above all else.
According to the Australian Institute of Company Directors’ (AICD) 2023–24 study, 26% of NFP boards were either undertaking or about to discuss a merger. You’re not alone.
Maybe some of your colleagues shouldn’t be ‘on the bus’ as it drives into a brave future. Maybe the journey ahead has some ‘non-negotiables’.
We can help you work through these issues, have the hard conversations in a way that would be impossible to do alone. The Merger Vision Workshop will help you determine if a merger is the right thing for you and if so, what the business case and objectives are, who is ‘on the bus’, what your non-negotiables might be, and who are your potential partners.
3. Failure to engage effectively
Remember your first stumbling attempts at approaching a potential romantic interest (assuming it wasn’t online)? The awkward dancefloor moves? The nervous smile? The bumbling first sentence?
Blowing a possibly huge connection might paralyse you with fear. And it’s hard to be an objective representative when you’re an employee or Director. So that’s where a credible outsider can be an effective matchmaker. The perfect ‘Wing-Man’ if you will….
Articulating the potential positive value for all parties. Offering to help with the initial conversations. Sharing calming experience and reassuring all that it needn’t be as awkward or difficult as you might think. This is where our Partner Connection Support comes in.
4. Poor partner alignment and surprise deal-breakers
Once that first contact has been made, rather than a slow awkward courtship dance, smart For-Purpose leadership can create a common ‘higher purpose’ that sees clients benefit and our vision(s) achieved. A North Star for your journey to come. Getting people from both organisations in the room together will quickly dispel the fear of ‘the other’ – you will realise that interests and passions are aligned (or not – which is also good to know early!!) as you articulate a joint vision for your (potential) shared clients. We can test cultural compatibility, understand each parties’ strengths and potentially pencil in leadership models.
When everyone buys into a vision, agrees on objectives and a business case, and lays their cards on the table (their own self-interests, their non negotiables etc) – even the two CEOs or two Chairs into one conundrum – a path forward can become clear very quickly. We might not solve every issue or question in one setting, but we can certainly get things moving via the Shared Purpose Summit. And again – if we can’t move forward – if the non-negotiables don’t allow us to progress, it’s better to know this early in the piece! That way we won’t waste time, money or energy. But more often than not, when we create a Shared Purpose, that becomes our North Star to guide the rest of the journey.
5. Too complex to deliver
Without doubt, the idea of delivering a merger, with the additional work and powerful sensitivities, can be daunting. Time to throw the idea into the “too hard” basket?
We have done this before, and can create a Merger Roadmap and Plan that reflects where both parties are now, where they want to get to, and each of the steps we have to take along the path. We will agree the right corporate and governance structure, work out which decisions need to be taken and when, how to deliver due diligence, and how to approach post merger implementation (workforce, systems, brand, finance etc). This merger might takes months or even years, it might seem too complex to deliver, but as Lao Tzu said “a journey of a thousand miles begins with a single step” – and this will get you moving.
It might need adjustment, but with that Roadmap, we know how to get there and you minimise the chances of getting lost or taking a wrong turn.
6. Not enough time or leadership experience
Every leader I have met in the For-Purpose sector works hard. Either as an executive, or as a Director. We work with little resources and are trying to tackle some of the biggest challenges in the world. It’s tough work, right?!?! Delivering a complex piece of work like a merger is beyond daunting.
I know when I delivered The Arthritis Movement merger I worked too many evenings and had too many nonstop days and sleepless nights. And whilst I had support from a lawyer and a facilitator, and wonderful boards and teams, it stretched me in an unsustainable way. Having a coach through that process would have been invaluable. Someone to offer accelerated solutions, take some of the responsibility off my shoulders, and provide an objective voice to the Board and committees needed to oversee the process. Merger Implementation support can ensure you and your team are coached through this process, minimising risk, to a successful outcome, leaving a legacy that will honour those involved and support your clients for generations to come.
For small charities the capacity challenge is even greater. You are probably working hard, even unpaid to keep the lights on, let alone do good work. And it’s getting harder for those organisations that rely on volunteering: a five-year ACNC analysis revealed a 17% decline in volunteer numbers among extra small charities, many of which operate without paid staff. Delivering a merger on top of this – alone – would be daunting at the least.
And the elephant in the room – Personalities
Make no mistake, the #1 reason mergers either fail to launch, or fail to deliver, is the people involved. And we aren’t talking clients here, we are talking employees, Directors, Founders, Members, donors, volunteers or others.
People who refuse to look beyond their own self interests (their salary, their identity), a piece of ancient history, egos, prejudices, or who just don’t get on with each other. It is tough, if not impossible, to be objective when you have ‘skin in the game’. That’s where an outside, impartial and sensitive voice can steer through these crucial conversations. There might be people that choose to ‘get off the bus’ but with the right support, and the right conversations facilitated in the right way at the right time, that bus will keep motoring on.
Take the first step – take the free Merger Readiness Assessment now!