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Small businesses, nonprofits opt to merge for survival

When most people think of business mergers, it’s behemoth corporations that come to mind. Banks and technology companies have made a habit of absorbing each other with the promise of even huger profits than they were making before. But what about small businesses and nonprofits? These companies merge, too, but with an entirely different goal: their continued survival.

It’s no secret that the lagging economy has been difficult for small businesses. They struggle to compete against large corporations and big-box retailers with more locations and resources. Recently, however, many have combated their financial need to downsize their staffs and cut services by merging with other companies. The result is more stability, diversity in services and a broader customer base.

Nonprofit organizations are doing it, too. To keep from going under in the midst of reduced outside funding, they’re pooling their resources with other nonprofits, allowing them to retain their staff levels and save on the cost of office space. Take the once-separate YMCAs in the neighboring cities of Minneapolis and St. Paul, Minnesota, for example. After merging their back-office and administrative functions several years ago, they are set to officially become one organization with the retirement of their respective CEOs.

The United Way even has a “merger fund” to help struggling agencies find potential partners. But a senior vice president for the organization says small businesses and nonprofits need to rethink their business model if they hope to stay afloat with a merger. It’s much like keeping the weight off after a successful diet: If you want to stay healthy, you’ll need to make some significant and permanent changes.

Also keep in mind that for a merger to work, both companies have to be satisfied, and that can require significant negotiation. You may want to contact an attorney who specializes in business law to help you navigate the transition and ensure a successful merger.

Source: Nashua Telegraph, “Nonprofits endure even as funding dries up,” Patrick Kennedy and Neal St. Anthony, Dec. 23, 2011

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