Ask Member Support: The board’s role in mergers and amalgamations
Due to rising operating costs, our organization is starting to consider the possibility of a merger or amalgamation with another organization with a similar mandate that is more financially and operationally stable. We want to do our best to continue to serve our community and the senior management team believe that this is our best option to preserve our affordable housing units.
We are having a difficult time raising the topic with our board. Many of our board members have been serving for many years, and while we’re grateful for their service and dedication, it can be difficult to get them on board with new approaches to running the organization. The possibility of a merger or amalgamation has been raised at a couple of recent board meetings and the response has been largely negative.
How can we convince our long-term board members that this is the right decision for the organization? How will our board function if we decide to proceed with a merger or amalgamation? I think this is very important for our board to understand as well.
This is a complicated issue with no single answer. Like starting to cook dinner based on a recipe and finding out there was a step you should have completed well before mealtime, we can tell you that you must lay a great deal of groundwork to ensure you have the support of the board. This includes potentially enacting term limits for board members and actively recruiting folks with specific skillsets and varying levels of experience so you have fresh perspectives at the table and actively engaged directors. In your case, it might be a good idea to specifically recruit someone experienced in a merger, consolidation and/or amalgamation process.
Another thing to consider is your strategic plan. The operational and business plan is born out of the strategic plan so you need to ensure that your board is ready to do what’s needed to carry it out; this is one of the main responsibilities of the board. If a merger or amalgamation is the best way to ensure continuation of services and allow your organization to meet its mandate, they need to be prepared to support that.
One thing is for sure when you’re planning for and going through an amalgamation or merger process: you’ll need a dedicated team to make it happen. A working group composed of staff and board members who focus on the process from start to finish would be invaluable. Working group members could also form a committee and work with a committee of a similar composition from the other organization. This group could use shared legal counsel, who would be required to share information between parties and represent the interests of board members and ensure that they have the information needed to make risky decisions, to help both groups arrive at an equitable agreement.
In terms of what the board might look like once a merger or amalgamation is completed, the most common instance sees the creation of a new board with some members from each of the original organizations represented. This can create a challenge if you’re combining individuals who are used to different governance styles, but it can also be a great opportunity to ensure continuity while reinvigorating the board. It might be a bit challenging if you are the smaller of the two companies and fewer of your original board members end up on the new board, but it provides a powerful legacy for the old board in ensuring the sustainability of the organization’s units and services into the future.
Questions about mergers, amalgamations, or consolidations? Want to know more about planning for board succession and recruitment? Contact us at email@example.com. We’re always happy to hear from you, and to help!
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