The topic of nonprofit mergers and acquisitions can expose the worst aspects of the nonprofit sector: egotism, territorialism, protectionism, and possibly a handful of other “isms.” The mere mention is often a non-starter and drives fear in the hearts of staff and board members…because the assumption is that mergers are only done when an organization is in crisis and that they will lose their identity.
However, what LSA has found is that a merger between two organizations can lead to greater impact at a lower overhead cost while retaining the uniqueness of both organizations.
Embassy Theatre + Audiences Unlimited
Recently, the Embassy Theatre, located in Fort Wayne, Indiana, announced the acquisition of Audiences Unlimited, Inc., an organization that provides live arts experiences to Northeast Indiana, serving people in long-term care facilities as well as adults with disabilities since its founding in 1972. The acquisition will enable Audiences Unlimited programming to continue and meet a community need for access to arts programming under the leadership and technical expertise of the Embassy Theatre.
While the public announcement drew attention, the process leading to the final acquisition began 18 months earlier. Neither the leadership nor the board had considered pursuing a merger when LSA first engaged with Audiences Unlimited, Inc. The longtime executive director, only the second leader of the organization besides the founder in its 50+ year history of serving the community, announced her plan to retire. At the same time, the board requested that LSA initiate a strategic planning process. Both the succession and strategic planning efforts started with a series of internal and external stakeholder interviews to gather opinions on the organization’s leadership, programming, fundraising, and other areas—typical organizational assessment work that LSA has been doing for several years.
What led to the merger decision?
The organizational assessment identified an opportunity to find a unique solution that reduces overhead costs while funding programs while achieving greater impact. The AUI board decided to explore options ranging from a fiscal sponsor to a full merger, and LSA interviewed several potential partner organizations. Additionally, LSA helped AUI develop a list of conditions that a partnering organization had to meet, including continuing the programs and retaining the Audiences Unlimited name related to the programs. The diligence process led to a promising conversation with Embassy Theatre leadership. The Embassy board had long sought opportunities to expand its educational and outreach services and had recently acquired another organization that produced an annual musical festival.
Funders, some of whom the organizations shared, were pleased that Audiences Unlimited, Inc. sought a new approach to long-term program growth, and in some cases funded the assessment and merger efforts.
Both organizations appointed a team of volunteers to serve on the merger task force, which met regularly as the financial, programming, and governance diligence continued. LSA facilitated these meetings and helped keep the leadership of each organization moving forward. These meetings enabled both organizations to share information, ask questions, and build trust. After several hours of discussion over a six-month period, both organizations voted to proceed with the necessary legal steps to merge formally. During this time, they discussed staffing, contracts, finances, fundraising, and workplace culture. They also agreed on how to communicate the merger to stakeholders, including artists, donors, and funders.
When the merger was announced, both organizations confidently assured the community that important access to arts programming, which had been central to Audiences Unlimited, Inc. for over 50 years, would continue and likely grow. The Embassy Theatre’s expertise in the performing arts, its connections to artists, and its strong reputation will help bring richer artistic experiences to Audience Unlimited groups for many years to come.
What made this merger process successful?
Several factors contributed to the successful outcome, with trust and transparency being chief among them. The leadership of both organizations approached the discussion with an open and honest desire to better serve the community. However, Audiences Unlimited, Inc. leaders had to be willing to give up control of the organization and its programs. While the merger agreement ensured the program’s viability, the board would no longer be “in charge.” Perhaps we don’t often experience leaders willingly giving up control for the betterment of their organization. While AUI would have continued as an organization, now aligned with The Embassy Theatre, the mission can expand.
Additional qualities include:
Mission alignment: Although differing in their delivery methods, both organizations served the community through the arts. Audiences Unlimited, Inc. and The Embassy Theatre desired to give arts and cultural experiences to people throughout northeast Indiana.
Complementary attributes: Unlike the Embassy Theatre, which relies primarily on patrons coming to them, Audiences Unlimited, Inc. had always taken the art to people where they were. The Embassy Theatre has a staff infrastructure and experience managing contractors to support Audience Unlimited artists and programs.
Mutual wins: The best mergers happen when both organizations can “win.”
While mergers and acquisitions may not be suitable in every situation, there are points in an organization’s lifecycle at which discussing the possibility may make sense. These times may include executive transitions, periods of dramatic increases in demand for services, a steep decrease in annual revenue, external pressures, opportunities to expand impact, and more.