Source: ASAE: The Center for Association Leadership
This article originally appeared on ASAEcenter.org. Reprinted with permission. Copyright ASAE: The Center for Association Leadership (January 2020), Washington, DC.
When and how two associations combine in a merger depends a lot on circumstances at the beginning, middle, and end of the transaction. From leadership transitions to board meeting schedules to advocacy needs, here’s how timing often influences the merger process.
Association mergers have proliferated in recent years. The association press reports on one or another regularly. Ever wonder how these complex projects get started, develop momentum, and make it all the way to closing?
There are lots of ways. For example:
In the Beginning
Regardless of how the idea emerges, timing usually has a lot to do with whether an association merger gets started.
The timing of CEO tenure is a big trigger. If the CEO of an association is leaving the position, this is often seen as the perfect time to talk merger with another group. Especially when the CEO of the other association is admired by the leaders of both organizations, merger is a way to have that CEO work for “both sides.”
The timing of an office lease can also spark merger talks. Headquarters space can cost millions of dollars over the full term of the lease. When a lease is coming up for renewal, leaders may see it as a good time to think about combining with another association and establishing one headquarters.
The timing of government relations activities might also trigger merger discussions. If a major legislative or regulatory battle is looming, the leaders of two associations might conclude that their advocacy work can be better funded and more compelling if they speak on behalf of both constituencies.
In the Middle
Once merger discussions have begun, timing is also the key to maintaining momentum. Extensive delays during merger discussions can result in loss of interest and enthusiasm, and ultimately it can cause abandonment of the project. It’s best for the merger committee to agree on a fairly tight schedule—perhaps three or four months for the entire endeavor—and stick closely to it.
Also figuring into the equation is timing of the participating associations’ board meetings. Usually the governing board of each association considers the matter several times. Initially the boards empower a joint merger committee to pursue confidential discussions with no commitment beyond that. During the discussions, the committee reports periodically to the boards on progress.
Eventually the boards, after receiving due diligence reports and transaction documentation, must formally approve the combination. If there are voting members, they likely have to vote as well, often based on the board’s recommendation. For all of these reasons, the timing of regular or special board meetings affects the pace.
At the End
Timing plays a part in planning for the finalization of the merger, too. Often the associations want to time the closing to coincide with other events in their regular calendars, such as just before or after a major convention or at the beginning of a calendar or fiscal year. Or they may want the merger to coincide with the planned departure of a CEO or the expiration of a lease.
Note that if a merger closes other than at the beginning of a fiscal year, a “stub year” financial audit and a partial-year Form 990 tax return will be required.
In short, starting, planning, and completing an association merger all depend on timing. It’s not much of an exaggeration to say that timing is everything.