Sometimes collaborations do not go smoothly. This post summarizes some of the pitfalls and lessons learned when a nonprofit tried to acquire a struggling nonprofit for all the right reasons, but the effort ended up being more trouble than it was worth.
Successes.
- Moving acquired organization’s staff on-site quickly helped with staff integration.
- Transparent and sensitive dealings with acquired staff, even through layoffs and major program changes, developed mutual respect.
Disappointments.
- Acquisition went forward despite late and inaccurate financial reports and other requested documents.
- Perceived rush by board and executive director and sensitivity to cost precluded detailed due diligence.
- Acquisition went forward in spite of stated donor, management and board “unease.”
- Acquisition contract was back-dated when signed.
- Due to multiple problems and irregularities, legal costs much higher than planned.
Lessons Learned.
- Financially and operationally, the situation was worse than feared.
- Executive Director was less than truthful.
- Board had little control or knowledge of Executive Director’s actions.
- Funds were inappropriately expended after Letter of Intent signed.
Documents were consistently late and signed late – got in the way of appropriate due diligence – transition was not executed cleanly.
- Bank accounts and line of credit not transferred on time – inappropriate expenditures.
- Deed of property not executed properly for transfer.
- Organization’s legal representation was provided by one of their board members which complicated matters.
- Organization lost its major sources of funding after letter of intent but before contract signing.