 and thank you so much for joining us for another amazing episode of The Nonprofit Show. Today's guest is Jan Glick with Jan Glick and Associates and Jan's going to talk to us a little bit or a lot a bit about nonprofit mergers and acquisitions and I'm really thrilled to have you joining us today Jan. Before we get started into the conversation Julia and I are here. I want to make sure that you know who we are as well. Julia is the CEO of the American Nonprofit Academy. I'm Jarrett Ransom your non-profit nerd that even Jan said that he didn't wear his nerd glasses today but I have them so we're we're good and of course we want to say thank you to our presenting sponsors that keep this show going and growing so thank you to Bloomerang, to the American Nonprofit Academy, Fundraising Academy, Nonprofit Nerd, your part-time controller, the Nonprofit Atlas, Nonprofit Thought Leader as well as Staffing Boutique. So thank you, thank you, thank you and of course if you're interested in rewatching or sharing any of our episodes with your contacts you can find us on Roku, YouTube, Fire TV, Vimeo and now in podcast form so we are a little bit everywhere and we're still working on that hologram that I talk about where you'll just say the non-profit show and Julia and I just kind of like hologram right into your office or living room or conference wherever you might be so thank you again to our presenting sponsors that help us keep this the show going and well Jan back to you I'm thrilled to have you we connected through a mutual friend and a mutual connection and just thrilled to have you here talking to us today about mergers and acquisitions welcome. Well Jarrett thanks for the invitation Julia thanks for the invitation it's great to be here and live. So absolutely yeah before we get going talk to us about Jan Glick and associates because we're narrowing down your brain power into one little area but I think you do a lot more than this and so kind of give us if you will a framework Jan so we can kind of understand how you came to be so prolific in this space. Thanks Julia. Yeah we formed the company 26 years ago I've been actually an engineer originally I owned a retail business here in a big shopping mall in the Seattle area and then kind of left the corporate world and was the executive director and environmental organization and decided that when I left the environmental organization I wanted to build a consulting management consulting firm serving the nonprofit sector mostly we do some government consulting as well but but all public sector and really build it based on data and research a number of which we develop and and over the years that's developed into a business if you look at our website we really do four things we do the mergers and acquisitions which we're going to talk about in a minute we do a lot of executive search all across the country almost exclusively for nonprofit executive directors and CEOs strategic planning and then last but not least I did write the first book ever on nonprofit turnarounds moving nonprofits from that are struggling uh towards success wrote that it was published in 2010 so thanks for asking Julia. Okay so now I'm like so impressed we really have to pay attention because this is a big topic I'm just I'm just like totally I have so many questions that I want to ask but I think the first one is what it what is the difference the key elements between a merger and the acquisition and an acquisition you know we don't see this a lot is in the nonprofit sector as probably as much as we should and so how do you kind of give us that lens before we start peppering you with so many questions? Yeah yeah it's a great first question um the difference between a merger and an acquisition in the nonprofit world you're going to hear me a few times differentiate nonprofit mergers and acquisitions from for profit they're actually quite different in terms of what happens and what doesn't happen but the the biggest difference up to the merger and acquisition is um you know it's a legal distinction and it's a terminology distinction so if you have one organization with 10 boards board members and another with 10 board members but only three come across right so the new the new nonprofit has 13 board members 10 from one and three from the other um that's a fairly common structure right and one could argue that's really an acquisition that is their outnumber 10 to 3 but um but depending on the legal structure that could have been legally constructed as a merger so the factors that play into merger versus acquisition on its terminology its number of board seats um which corporation which legal status remains after the integration right so you have to be one single nonprofit corporation you can't be two and depending on how that negotiation worked out it could tip toward a merger versus an acquisition the last thing I will say on this is it's all about brand and perception and a lot of deals that are actually acquisitions right so say that the smaller the less the weaker to use that term um say the weaker nonprofit only gets one or two board seats most of the nonprofit deals that we do are announced as mergers because both parties decide it's better for the community it's better for the clients we serve to have this be seen as a merger rather than acquisition so those are just some of the subtleties it's a really a subtle distinction. So never did you mention ego Jan that it that didn't come up in any of those two definitions and I'm curious and Julia you know said we don't hear about this often probably not often enough and the number we throw out is 1.8 million and perhaps that's changed but you know roughly 1.8 million non-registered nonprofits in the United States how many and just a ballpark or if you happen to know the statistic that's even better but how many you know organizations do undergo a merger and acquisition process I don't know let's say like on an annual basis do we do we have a clue? We don't you know as as you both know the nonprofit sector is so under resourced underfunded there tends to not be a lot of data developed there's not a lot of money into you know put into from the big funders into that kind of systemic sector-wide work and funders for years 20-30 years as long as I've been in business have always wanted to sort of incentivize nonprofits to come together because of that 1.8 million the average non-profit as you know is under a million dollars in size which is the size of a postage stamp right it's you're talking three four staff is a typical nonprofit and so it's hard to really change the world which is what all of us want to do with three four or five staff. Where the ego comes in and this comes across both in my book and we also published a white paper which is available on our website jenglick.com published that in 2020 the first year of the pandemic and it's entitled 26 consolidation since the great recession so since the 0809 recession we've done 26 of these mergers and acquisitions before the the pandemic recession and that white paper talks about the characteristics of those 26 deals and where the ego comes in is that that's what prevents that 1.8 million from getting smaller the number of nonprofits in the US only goes in one direction it goes up and up and up despite everybody's still small and so where the ego comes in is that boards of directors and executive directors and CEOs really hang on and even if the organization's kind of limping along and struggling they don't really want to say uncle and and and approach approach a larger a more effective organization across town or across the county that has more capacity that has stronger systems has a stronger brand and they'd be able to pursue that mission and that's where the ego comes in and the folks that approach us to help facilitate a deal are the ones that are fairly egoless and and really understand that they're there for the community and not for their own you know ego well and they've probably my assumption is they've probably also done a lot of due diligence to see some solutions one of the things you know that I've learned through the third sector academy and the interim executive academy rather is the consideration of the mergers and acquisitions and so you know learning that that's an option that there's you know professionals out here that can serve nationally and that's something you had shared with us is that you have served in this capacity across the nation multiple states and so that's a really good resource and you mentioned these 26 characteristics are the the characteristics of these 26 and that sounds like a good spring break reading for me so I can't wait to dive into that yeah sounds good yeah I need to know that because I think that you know this is the sort of thing that is can be a positive guidance for an organization versus you know to enter into that that world of the ego as a failure and especially with founder syndrome and all of these organizations that are so tied to their mission in an emotional way rather than a statistical way or you know really understanding what are some of the hard facts it's it's kind of one of those those things and that leads me to I think our next question and that is what is this process I mean how do you how do you get leadership involved and talk to us about what this even looks like yeah yeah um and so um a few kind of top-line comments first of all a um there are two decisions that nonprofits make that I call the ultimate governance decisions right and we work on both of those one is selecting a new executive director or CEO and the other is entering into a merger or an acquisition right it's the same decision who's going to run your organization right is it this person or is it this organization right and I call this the ultimate governance issue and so it's a board decision only board members have votes and typically it's a consensus decision we rarely see a board vote to merge or vote to be acquired without unanimity of the board and and boards will spend a pretty significant amount of time trying to really convince the you know the one or two naysayers on the board so so it's a governance decision um usually the executive director though as in all other aspects of nonprofits really does all the due diligence you know has the main relationship with the you know with their counterpart CEO in the other organization uh spends a lot of time really working with their board and the merger committee um so that's one aspect of it really it's a governance decision um the other aspect is um you know the process itself there's an increasing amount if you just imagine just a steady ramp up of the word Jared mentioned a minute ago due diligence so there you know two or three or four phases in any merger acquisition process of due diligence so at the beginning it's you know CEO A talks to CEO B and and and you know tries to figure out if it's a good fit is the other party interested because it's feel like a good fit and there are two kinds of fits what one fit is we do the same thing and so if we put our efforts together we're larger we have more scale that's what we call um complimentary fit right and supplemental fit is um you know organization A does healthcare but doesn't have mental health in their organization and organization B does mental health so they merge mental health and physical health so those are kind of two different ways of looking at fit and uh and as as the CEOs explore this they they will then go to their boards and say I think there's some you know there's some there there we should really explore this further can we can we establish a merger committee and can we assign a non-disclosure agreement with this other organization to start exploring the deal and keep it confidential and so it's just simply an agreement to talk and then the next phase if the talks go well between the two committees and with all paperwork exchanged if the talks go well the next gate to go through is typically a non-binding memorandum of understanding this says we've been dating for a little while and we now have the ring on our finger right though we're kind of we're kind of but you can always take the ring off still right when you when you get that engagement ring you can always take it off that's right right until the actual marriage is done so the the MOU is non-binding and then there's one more phase where there's more due diligence more paperwork exchange more exploration and that's the phase which we call structuring the deal that's where we figure out the number of board seats that's where we figure out um oh Jan was the CEO of the small organization but this other one's so much bigger let's see if we can make Jan the vice president of department X and you know when we structure the deal come up with the specific terms and additions of exactly how these two organizations fit together and usually that's the point at which when the deal is structured then you sign the final binding merger agreement or asset transfer agreement whichever the legal structure is so it's an increase in series of due diligence an increase in series of exploration and increasingly committed you know at the beginning you're not committed you're exploring at the end you're very committed so I knew I'm like I'm like that at what at what point in this process Jan should these organizations bring in a professional like yourself when do we start engaging in this conversation and second second question of this should we have two of these professionals like should one represent one organization and the other represent the other great these are these are really great questions great questions really important questions um so the answer is um bring in the professional with non-profit merger experience pretty early not not you know not necessarily the very first time you talk to your other CEO counterpart and not necessarily the second meeting but but kind of before you have a committee or as you're forming a committee of your board get that merger that non-profit merger consultants on board and I differentiate the non-profit from the for-profit is the for-profit um there are many things about for-profits that non-profits should use but there are also many many things which really don't apply and and because a for-profit merger is based on the value of the stock shares and it's all about making money for the corporate shareholders we don't have stock and non-profits it's not about money and non and for-profit consultants and for-profit attorneys can really think a deal because they try and assign value um when what our sector is all about is helping the community and and so when I say and when you ask and when I say get a non-profit merger expert non-profits the keyword the other word merger this is not like strategic planning this is not like facilitation this is not like fundraising um there's a very small number of of non-profit M&A experts in the United States um we've we've met a few others I've I've met colleagues kind of like myself who have done over 10 deals met one in Chicago met one in Boston there's probably 10 or 15 David La Piano wrote the book on non-profit mergers about 25 years ago he's in san francisco there's probably less than a dozen of us united states um and so bring him in early don't bring the attorneys in early though bring the attorneys in late um because even if it's a non-profit attorney um the structuring of the deal is not a legal structuring of the deal the structuring of the deal is staff positions board positions branding it's all the things that non-profit leaders understand you bring attorneys in sort of you've heard all the milestones right the non-binding MOU versus the binding agreement so oftentimes we write the non-binding MOU because we have you know 35 templates um but we bring in the attorney before the binding agreement so um attorneys are trained um to defend their client and to represent their client and do your last question Jared is it one consultant or two um so even when we represent the smaller entities smaller non-profit we're usually looking at the deal from the lens of how do you help the community the most yeah how can you structure this new larger entity to best serve the communities even when we're representing the smaller guy we're kind of representing the community right who's the client right the board represents the community served right the board represents the public so we try to represent the best you know interest if you will of the mission so so we've done about uh 25 percent of our deals we've been hired by both parties 75 percent were hired by the what I call a partner seeking partner to keep on with the relationship and marriage metaphors yeah really interesting I mean I would imagine that um it's really a function of as Jared said right out the gate letting those egos go by the wayside that if you have leadership that is um really looking towards the community issue they're going to be easier and they will be they'll they'll work with one individual they'll work with one company but if the ego piece gets too convoluted then I can see where then there's that desire to get my own representation and you know in all of that yeah but otherwise I kind of see it as a mediation you know it's like as you said Jen you're representing the community you know the cause the mission and looking at that so when you do this can you talk to us about what success looks like like how do we know that we've achieved a successful merger and or acquisition uh what are we looking for what's the end goal here yeah so um back to percentages uh again we we've seen um you know we did our first partnership it wasn't a merger but it was a multi-party partnership back in 1998 so we've been doing this for 24 years and we've done something like 35 37 deals now of which around 80 percent have come to fruition around 20 didn't come to fruition we had all these experiences with different structures and about about 15 percent or so are kind of best case situations where two strong organizations are really smart right these are two strong well-led organizations and they and they realize they'd be even stronger if they come together okay that's the best case but we only see it about one time out of six and and over the years more and more what mergers and acquisitions are driven by they're driven by financial struggle struggle to make ends meet and so it's usually the small entity approaching the bigger entity the weaker entity approaching the stronger entity and so what makes it successful is continuity of mission continuity of services that so we had we did a merger of a community mental health center here in king county washington into a hospital system that four or five years ago so this was a 45 million dollar um community mental health center with 650 employees and the ceo you know spoke on a panel but i was facilitating a couple years later and the ceo said look you know i'm i'm 66 years old you know in 30 years when i'm you know dead and buried i'll know that my 650 employees lived on you know in the hospital system that that mental health division of the hospital system is thriving and that the thing that i spent 17 years leading it lives on and so that is absolutely the number one goal and what indicates success um you've heard me mention job retention um i think that's a really important point that people this is one of the confusing things when people hear merger all the coverage in the in the media is around corporate mergers and everybody knows in a corporate merger there's thousands of jobs lost that is completely different in nonprofit deals it's 100 different there's hardly ever any job loss and the reason why is because nonprofits are tiny um and there's never enough frontline workers there's never enough social workers there's never enough you know artists for the arts organization there's never enough environmental advocates for the environment you know so the frontline workers they're almost you know enlists a clause in all the deals there's a guarantee to retain the staff and in the occasional case where the ceo loses their job it's often an interim ceo who will initiate the deal or the ceo is ready to move on or they become a vice president or you know but if there's ever any job loss it's often the ceo or maybe the cfo and it's it's a minuscule percentage of all these deals so it's mission retention it's staff retention um are the biggest indicators of success you know i'm so glad that you you have said all that you've said jan you're a very brilliant mind um and i'm thinking you know as you mentioned earlier the nonprofit sector is under resourced by so many ways and staff the workforce is is a big one and so looking at these mergers as an opportunity to serve the community in a greater way often means keeping all of the staff right and as you said we're never you know we're never in abundance of social workers we're never in abundance of um this help it's even better than that right because one of the problems when you work in a nonprofit there's very little career track right if you work in a 10 person nonprofit there you're either you know a program person an administrative person or the executive directors there's long like two levels everybody reports the executive director you get acquired by a 50 person nonprofit now all of a sudden you have like three layers of management you have a career path all of a sudden um benefits are typically better the larger the nonprofit is professional development training is better so there's a whole lot of things that makes it better for staff even though staff are worried when they hear the m word they worry about job loss and in fact they should be like thrilled because also there's going to be more opportunity for them yeah that's a great point which comes down to communication right it's how do we how do we communicate this to all stakeholders um internal external and uh you know to to state that this is this is for the greater good of the community yeah and the communications plans as part of the merger process are really interesting because you have to sort of keep a lot of these discussions confidential initially you know within a small circle of board and senior management um and you're ready to sort of take the wraps off when you get late in the process and announce it and so that messaging is always a very key part of the process but it but it's kind of held until late until there's clearly a deal and then the very the very top thing right for the internal messaging is job retention yeah right we don't have a lot of time left with you but you've covered so many things that I am fascinated with and I see the pattern I see the trajectory of marching through and being successful and I realize that all deals are you know different but could you give us an idea for how much time we would need to invest in this or see this through like what does that look like yeah and we have if you go to our website both through the merger drop-down menu and the resources menu we have a we have both that white paper on there and we also have a merger PowerPoint on there and there's one slide that talks about what's a fast deal what's a slow deal okay so the average the average deal is seven eight nine months from start to closing you say six to twelve and we've done some that have moved super fast um at four months just you know where where the CEO is really ready it's a small organization they control a lot and they can sort of you know move it fast and we've done a couple I mean one we had a big deal and the pandemic just stopped it we had we had a a couple you know very large our profits twenty five million a hundred million dollar organizations trying to come together and that had been going on for 18 months when the pandemic hit two years ago and just put a just stopped it um so the pandemic has stopped a lot of activity because people have been able to get together people have been hungry down for two years um but roughly speaking the longer ones might be 18 months two years and that that's a long time you know to kind of work out do we come together or do we not but that's the range wow fascinating topic and I know I wish we had more time because I know we could talk for for hours but I am going to take a look at your website and these resources that you mentioned so thank you Jan for all that you and your associates do around the nation we are so very fortunate to have you not only here as our guest but truly in the sector serving serving the community so thank you thanks Jarrett thanks Julie it's been a pleasure to be on your show oh my gosh it's been great and you know um you really touched on so many of the backstory issues that lead us to this discussion and so um thank you very very much and I too will take a look at the the white papers that you have um because this is with the with the change of the pandemic moving into an endemic phase I think these things are going to come back up I mean I think some of these discussions are going to be front and center and so we're thrilled that there are people like you out there that are doing this here's transinformation jan glick.com check them out and see what's cooking um and how this might be a strategy for you again I'm Julia Patrick I've been joined by my trusty co-host today Jarrett Ransom CEO of the Raven group also known as the non-profit nerd again we want to thank all of our presenting sponsors without them we would not be here bloom orang the american non-profit academy your part time controller non-profit nerd fundraising academy non-profit atlas non-profit thought leader and staffing boutique and as we end every episode we want to remind everyone to stay well so you can do well we'll see you back here tomorrow