As associations consider how to navigate a post-COVID environment, many are considering big, bold moves. Overall, this is good news for our sector. New pathways toward growth and vitality require creativity, risk appetite and resolve. Within this context, several groups are pursuing a comparatively high-impact strategy: mergers.
A noticeable uptick in merger and acquisition activity, which began just before the pandemic, is continuing to accelerate. A range of market and organizational drivers have led staff and volunteer leaders to appreciate that, in some cases, the best path forward is an entirely new direction—one that results from the creation of a new organization.
Our work with the Association for Materials Protection and Performance (AMPP), formed by a merger of NACE International, The Corrosion Society and SSPC: The Society for Protective Coatings, is a good example of two organizations combining for the benefit of an industry. Another is the newly announced merger exploration of the Society of Petroleum Engineers (SPE) and the American Association of Petroleum Geologists (AAPG), which seek to become the home for energy professionals of the future.
We’ve supported several associations that have assessed potential mergers. While the process requires a great deal of effort and analysis, regardless of the outcome, it often results in meaningful returns for both parties. Whether the organizations reach a deal to merge or not, the process brings clarity and often introduces opportunities for ongoing collaboration.
Find out how to determine if a merger can take your organization down a successful new path.
What is an association merger?
First, it’s important to be clear about the fundamental nature of an association merger and why it’s different than an acquisition. In a merger, we find two or more associations ready to participate in the creation of an entirely new entity. Hot tip: If one organization’s brand remains dominant following the merge, it probably doesn’t qualify as a merger even if that’s what’s in the talking points.
On the other hand, an acquisition represents the purchase of an entity or specific assets, such as meetings, programs or educational content. The buy-side is when an association approaches another with a purchase offer. The sell-side is when an association seeks out another entity to purchase one or more of its assets, perhaps because those assets aren’t core to its current member value proposition.
According to Bob Chalker, CEO of AMPP, “As we went through the merger process, we were very conscientious and clear that this was a merger of equals, and we were creating one new organization built on the long-term success of the legacy organizations. A merger of equals does not mean that all things are done equal or 50-50. It does mean that the leadership of both organizations have equal input and influence in the process.”
Why consider a merger?
In our experience, there are several key reasons why a merger could be a beneficial path forward for an association.
A merger can help the resulting new entity tap into adjacent markets and opportunities:
- A larger market increases the opportunity to grow membership, products, programs and the volunteer base
- An expanded portfolio of services can diversify revenue
- A merger likely results in faster growth than the launch of an entirely new association or a rebrand
In some cases, a merger of two associations leverages complementary strengths, such as:
- Greater operational efficiencies and reduced “back office” expenses
- Combined talent that fills gaps or drives innovation
- Economies of scale can be found in consolidating overlapping functions
“Where there was overlap, there was opportunity,” said Chalker. He added that, “SSPC and NACE were very good at what they did separately, and even though some of the programs were similar, each association had things it did better than the other. Now that we’re merged, we are combining the best of both organizations into our programs and services.”
Create a unified voice while decreasing competition
Market confusion and duplication can be harmful to shared priorities:
- One unified, authoritative voice often resonates with funders, legislators, regulators and the industry as a whole
- A single group can help preserve and expand the volunteer pool, which is especially important when volunteer capacity is tight
- The elimination of multiple, competing memberships or participation options results in greater affordability — and more meaningful engagement — for stakeholders
“Our members often had to choose between membership to one organization or the other, one conference or the other, between sources for industry standards and information. Or worse yet, pay twice. Uniting it all in one association is already benefiting members and saving them time and money. In return, we’re gaining strength in numbers which helps us do more to serve the best interests of the industry we represent,” said Chalker.
A typical merger project involves significant scope and breadth. It encompasses many variables, stakeholders and steps that range from financial analysis to scenario development. We’ve outlined some key phases below.
Phase One: Assess feasibility.
This is the discovery stage, where a select workgroup leads the initiative and evaluates factors such as financial considerations and programmatic overlap. A great deal of objective due diligence should be applied when evaluating the business case for a merger. It should draw on data, modeling and stakeholder input to test hypotheses and create a solid case for viability. If a business case is made, it’s time to proceed to the next phase.
Chalker offered that, “In the earliest days of the merger, despite a great rapport between the member leadership of both organizations, there was a hesitancy on both sides to show our cards. The best thing we did was bring in an impartial third party to help us navigate what was probably the most fragile step in the process.”
Phase Two: Assess suitability/ determine market demand.
Next, it’s time to test for broader support. At this point, the workgroup would typically go to the board to determine if there’s agreement to continue. The driving questions include: You could do this, but should you do it? Does it make sense to our markets? This step involves collecting market intelligence to build the case. Trust and collaboration between entities will be essential moving forward.
Phase Three: Develop scenarios.
At this stage, it’s important to focus on specific details. How will the two associations come together? What will the brand identity and governing model be? How will the new organization be staffed? What will the dues structure be? Will there be more member value created through the merger? Ensure that these factors are considered objectively.
Phase Four: Validate and implement.
Despite the significant investment up to this point, a lot of work remains to get to yes. The board and probably even the membership need to approve the merger. Final details on how the new entity will be structured need to be resolved. A CEO/ executive director needs to be selected. A strategic communications plan for the rollout must be built. Project planning, management and ongoing facilitation are essential.
“When the time came to implement the merger, our staff was balancing a heavy workload,” said Chalker. He continued, “We didn’t have the capacity to add management of the merge to either organization’s team, so we kept McKinley on board. It would have been the right move under any circumstances, but when the pandemic hit, the decision was validated ten-fold. Not only did we get things done on the timeline set by our board—we did it with overwhelming support from our membership.”
McKinley Advisors provides research, assessment, and facilitation services to help associations explore the feasibility of potential joint ventures, mergers and acquisitions. We serve as an objective and expert project manager, facilitator and “through-line” to guide our association clients through the process.
Need help uncovering the data and drivers necessary to make informed decisions and build consensus around a workable path forward for your organization? Get in touch to find out more about how we can help.