2017 Connecticut Land Conservation Conference. Anatomy of a Merger

Transcription

1 2017 Connecticut Land Conservation Conference Anatomy of a Merger

2 Learning Objectives Spectrum of collaboration Key indicators that it might be time to consider a merger Factors that contribute to success and obstacles to success Explore the reality of mergers using a recent case study Land Trust Alliance 2017

3 Land Trust Alliance 2017

4 Risk Collaboration Spectrum Information sharing Cooperation on projects Cooperation on stewardship Cooperation on conservation efforts in overlapping service areas Affiliations Sharing staff Sharing staff and services Merger Source: Land Trust Alliance (via Maine Land Trust Network) Reward Land Trust Alliance 2017

5 Merger Benefits Increase impact Increase efficiency Increase capacity Improve organizational sustainability Eliminate competition Land Trust Alliance 2017

6 Key Questions to Ask Is there a strategic fit? With services With geography With brand With organizations With financial impact Land Trust Alliance 2017

7 Key Ingredients for Success Trust Shared goals Champions Resources Communication Time T R SG C C T Land Trust Alliance 2017

8 Barriers to success No financial incentives Lack of direction Founder s syndrome Rushing Lack of trust Incompatibility Crisis Self-interest Land Trust Alliance 2017

9 Practical Pointers (or best practices?) Commit to success Secure funding Be transparent Keep momentum (avoid deal fatigue) Emphasize equality (avoid survivor talk) Hire a facilitator Use legal counsel (consider using counsel to the deal ) Combine board resources Communicate well Have a transition plan Land Trust Alliance 2017

10 Where Do You Start? It s a slow dance

11 Where did New Fairfield & Danbury start? Northern Fairfield Land Trust Coalition Two land trusts began talking about how difficult it was becoming for land trusts to function, build capacity and be more attractive to landowners One of the land trusts had a generous funder. A conversation between the ED and Board Chair: Why don t we start talking about merging with each other? It was that simple and that direct.

12 The First Official Meeting What they talked about --- What mergers can accomplish Why mergers can be good What each of their land trusts do

13 Uncanny Similarities One had 19 properties and 210 acres under protection The other had 18 properties with 218 acres under protection. One had 2 conservation easements; the other had one. Each had approximately 10 members on their boards. Each land trust was functioning well independently and each was strong and viable.

14 Dissimilarities Became Opportunities DANBURY STRENGTHS Strong infrastructure; Effective at fundraising First among coalition to pursue accreditation DANBURY WEAKNESSES Limited public access No viable parking No trails that made it possible for people to connect with the land. NEW FAIRFIELD STRENGTHS Considerable public access; Well-developed and maintained trails. NEW FAIRFIELD WEAKNESSES Minimal fundraising capacity Far away from accreditation Strong relationship with the local high school

15 Decision to Move Forward A Merger Team of four people from each land trust was formed. Meetings every two to four weeks Sharon Danosky served as the facilitator. The details of these meetings will later become a part of the actual Merger. The Merger Team brought the discussions to their respective Boards.

16 Getting To Know One Another At every meeting the team would go through various exercises and later discuss them. These included discussions that the team members could later refer to as the merger details would emerge. Discussions focused around: Benefits of a merger with team members articulating all the positive reasons to merge Obstacles to overcome in a merger where team members listed all the possible concerns that might arise. Problem-solving specifically asking team members to come up with possible solutions for all the concerns listed above. What the expectations of the merger would be and how team members could set realistic expectations. DANOSKY & ASSOCIATES 2017

17 Decisions Prior to Intent to Merge The name could not represent either existing land trust and would have to be neutral and so a new name was approved by both Land Trusts. Every board member should have the right to serve on the new organization. While some decided not to, the process was inclusionary. Director seats are the currency of nonprofit mergers. All the elements of the by-laws were discussed the fiscal year, annual meetings, committee structure, officers, and even term limits (which generated much debate but resulted in having term limits). The roles and responsibilities of board members to ensure that the culture that would emerge was based on the same expectations. Policies and procedures with one Land Trust assuming those of the other to conform to Land Trust Standards and Practices and their pending accreditation. DANOSKY & ASSOCIATES 2017

18 Intent to Merge Boards took a vote stating their Intent to Merge. Boards held a cocktail party to get to know each other Then the legal work began (memorializing the intent in a non-binding Letter of Intent and Nondisclosure Agreement) Sort out the issues before stating your Intention to Merge

19 Creating a Memorandum of Understanding: Letter of Intent Binding vs. Non-binding Nondisclosure Agreement Timetable / Deadlines TIME TO WORK OUT THE DETAILS

20 Addressing Governance Issues Legal and Corporate structure and designation of 501(c)(3) status By-laws Policies and Procedures Merged Board and designation of Officers Name of the merged organization Membership status Voting vs. non-voting Multiple classes? Combining various categories?

21 Addressing Financial Matters How will grants, bequests and donor restricted assets or other assets held in trust be affected? Due diligence of all assets, including land held in fee simple vs. restricted use land easements and financial statements (use of due diligence checklist) Accounting systems Liabilities or potential liabilities Insurance coverage Fundraising activities Donor relationships and impact of potential merger

22 Properties/Land Management/Acquisitions Status of properties Management plans Baseline documentation Stewardship Properties pending acquisition Trail status Deed restrictions Effect of merger statute DANOSKY & ASSOCIATES 2017

23 Compromising Compromise: The basis of success in any relationship The approach each land trust took relative to board members fundraising almost became the deal-breaker. One Land Trust was more aggressive and expected a more pro-active approach from its Board. The other had an approach that recognized board members talents as being equal or in lieu of their financial contribution. Fortunately, a nice compromise was reached.

24 The Decision is made to Merge

25 The Legalities: One Attorney for the Transaction Use of an action items list with assigned responsibilities and status bars to stay organized and keep momentum. Review of all the land deeds and whether there were use restrictions that would have to be addressed during the merger and to be sure each party understood the other Land Trusts holdings. Summary of the deed restrictions that would have to be upheld (cy pres / approximations?). Formal preparation of the by-laws, which fine-tuned already existing understandings and conform with best governance practices. Review of financial statements of each Land Trust (which were also reviewed by a CPA) and disclosure of the accounts. Permanently restricted funds (true endowment funds) were disclosed and analyzed. Preparatory information for the land trusts to each have the requisite information to share with their membership to approve the merger. Procedural analysis of notice and voting requirements for members and directors.

26 Merger Communications Announcement of Merger intent to: Members Donors Colleagues Land Trust Community General Public Impact of Merger on constituents Managing public relations relative to decision to or not to Merge

27 Create a Merger Communication Plan Action Each land trust to send announcement to its membership First meeting of membership to hear information Second meeting of membership BOARDS and MEMBERS VOTE The Vote ANNOUNCMENT Message Announce that the land trust has been considering a merger; outline the reasons; invite to a meeting to learn more and to provide input for consideration as we move forward Leadership of Land Trust will briefly describe what you are doing and why. Primarily we will be listening for concerns and questions to be able to address and bring back to the membership Joint meeting to bring back the responses and answers to the questions they raised and the concerns they have Joint meeting where the boards vote then formally recommend the merger to the members and the members then will be asked to vote, followed by a celebration (if all goes well). Press Release announcing the merger

28 Making it Official When it came time to merge, a central location was chosen where each land trust could have its own separate meeting to formally vote on the merger. The attorneys had prepared all the transaction documents and proposed resolutions that were necessary. First, each Board had to meet separately and take its vote to merge. Then each Board had to bring their members into the meeting so they could vote and approve the merger. Preliminary meetings had been held with the membership to ensure that their questions were addressed prior to the meeting where the vote was taken.

29 It s Unanimous! The votes for both boards and members were unanimous! A quiet celebration was held. In the weeks that followed, the attorneys filed all the necessary paperwork for the merged entity (certificate of merger with the Secretary of State, name change certificates with the applicable land records).

30 Where Are They Now? Since the merger, Board members have been wending their way through a myriad of details that include fundraising events, activities, land management projects, stewardship, and more. New Executive Director hired There have been some immediate benefits that includes membership flourishing, a strategy for land management has emerged and budgeted funds have been allocated to accomplish objectives. Communications have been slow, website not yet completed A recent event turned out to be more than just financially successful. Many more friends came forward and

31 Credibility Yields More Opportunities 4 landowners approached the newly formed Land Trust Their reason the land trust is seen as stronger, more viable because of the merger and being accredited

32 The Reason it was Successful Working through all the issues in advance The Board members got to know and like each other

33 And The Not So Obvious Reasons A funder willing to support the effort A bottle of wine at every meeting And a golden retriever named Molly There, there this will all work out. AND SO IT DID.

34 Rebecca Washburn New England Program Manager 146 Blush Hill Road Waterbury, VT Sharon J. Danosky Owner PO Box 1225 New Milford, CT Edward B. Spinella Attorney One Financial Plaza Hartford, CT