The components of a successful agency integration: Important considerations in a merger/acquisition/partnership

Transcription

1 The components of a successful agency integration: Important considerations in a merger/acquisition/partnership COA Conference New York

2 Introductions Amelia Franck Meyer, CEO Anu Family Services Crystal Peterson, Regional Director Anu Family Services Mark Munzenberger, Director of Organizational Quality and Education GreenPath, Inc.

3 Our Time Together: Agenda If you pray for rain, be prepared to deal with some mud. -Unknown I. Setting the Stage (Part I) II. Things you need to know 3 Stages of Merger I. Pre-merger Planning (Part I) II. Merger (Part II) III. Post-merger Integration (Part II) III. Lessons Learned (Part II) Collective Wisdom

4 Setting the Stage Our Stories: case examples The Realignment Spectrum What are you trying to accomplish? Importance of Culture and Language Tendency towards differentiation Non-profit vs. for-profit Reasons for partnerships

5 Why and how the partnership happened You had me at hello. From Anu Family Services Perspective From Teipner Treatment Homes Perspective First Steps

6 What was going on in Wisconsin? Newly formed Department of Children and Families Rate Regulation Wisconsin Allowable Cost Policy Levels of Care Graduated Licensing CANS/Child and Adolescent Needs and Strengths Performance-based Measures Change in Administration Fiscal Crisis

7 The Why from Anu s Perspective 3 year strategic plan to grow because: Mission imperative Saturated market Rougher seas=need for bigger boat 3 year plan became more urgent because: 40% reduction in census over 4 month period Upcoming state changes Fiscal climate/recession

8 Anu s Response to Changes Competitor Analysis Decision to grow by merger/acquisition Agency discussions about ideal partners Creating/Presenting the case for merger

9 The Why : From Teipner Treatment Homes Perspective Census drop 100 Census Series layoff in January 2010, 2 in March. (only one other layoff in TTH history) First call to Teipner Executive Director in March. Evaluation of system factors (next slide)

10 The Why : From Teipner Treatment Homes Perspective Rate Regulation Levels of Care Regionalization Fostering Connections Proliferation of CPA s

11 A non-profit acquiring a for-profit Anu Family Services & Teipner Treatment Homes: Anu approached Teipner Anu purchased Teipner Anu was surviving agency: Name Culture/model CEO & board

12 Agency History and Structure Anu Family Services $3.5 million 75 children in TFC; several other smaller programs We create permanent connections to loving and stable families 50 counties throughout Wisconsin: Strong in Western and Northwestern Wisconsin 35 Employees CEO, COO, 2 Regional Directors East and West Non-profit Board of Directors Founded by a group of foster parents in MN through former parent company. In WI since COA accredited Teipner Treatment Homes $3 million 80 children in TFC Every child needs and deserves a quality home 45 counties in Wisconsin: Strong in Eastern and Northeastern Wisconsin 14 employees Executive Director, 3 Supervisors For-profit Advisory board, but no governance board of directors Founded by a foster parent in 1983who sold the organization in 2006 to long-time employee who became the Executive Director Not COA accredited

13 Anu Family Services (Post partnership) Provides services to children and youth ages birth-18; and a small population of transition-aged adults. Operates a continuum of care with over 10 programs including Treatment Foster Care, Family-to-Family Mentoring, supported independent living, and other family-based services. Operates in 57 counties and 6 tribes throughout Wisconsin, and licensed to operate in Minnesota as of January 1, Primary office locations in Hudson, Eau Claire and Madison. Serves children per day and approximately 300 children annually. $6 million dollar operating budget; non-profit. 50 staff persons.

14 First Steps Use of a merger consultant Nondisclosure agreements CEO outreach Meeting to make the case for partnership

15 Laying the Foundation: The Timeline 3/4/10 Anu CEO first call to TTH ED 7/21/10 Combined Staff Leadership retreat 7/26/10 First transition team meeting 5/7/10 Anu CEO meets TTH leadership 7/15/10 TTH ED presents at Anu board meeting 7/30/10 Legal agreements signed 7/12/10 Anu CEO on TTH Staff call 7/15/10 Anu CEO & COO meeting with TTH ED 8/6/10 First all state staff meeting

16 Getting Everyone Else On Board Meeting agency leadership TTH to Anu Anu to TTH Building trust and rapport Clarifying roles Meeting of the Board of Directors TTH ED to Anu Board

17 Establishing the Transition Team What must be decided before finalizing the deal? What are deal breakers What can wait to be decided together later? Shared leadership/power/investment in the Transition Team Anu s CEO not on the Transition Team Equal ground Place to appeal

18 GreenPath Mergers & Acquisitions GreenPath offers debt counseling and solutions 40,000 Clients Operations in 12 states Over 550 employees (from 175 in 2003)

19 It s not just about mergers Form follows function... What are you trying to accomplish?

20

21 Importance of Culture Culture eats strategy for breakfast -Peter Drucker And for lunch and dinner, too -Amelia Franck Meyer

22 Blending Cultures: The Keys to a Successful Merger and Acquisition Always do a thorough and detailed analysis Understand that people will be nervous Look for similarities and consistencies Start with limited coaching and mentoring Ensure existing clients will not be adversely affected Train your new employees Talk often to your new trainees Shower them with love! Ensure plenty of on-site support in the first 90 days

23 The Importance of Language Intention and meaning of language Merger vs. acquisition Accuracy of language Various audiences

24 Tendency towards differentiation Separate organizations Collaboration Administrative or other consolidation Merger/Acquisition

25 Make a clear case for WHY Being very clear on the sense of urgency or the why we were doing this: Diversification? Mission impact? Stability? Geography? Being very clear on why we can t remain separate and just collaborate

26 Non-profit vs. for-profit Culture CEO vs. Owner Role of Board Composition of Board Financial Costs Legal structures before and after

27 Reasons for partnerships 1) To promote excellence 2) To align with an overall business strategy 3) To achieve financial stability 4) To achieve positive outcomes --MAP for Nonprofits Changes in market place Making the Case for merger

28 Stage I: Pre-merger Planning Pay now, or pay later. Setting a strategic goal for growth Identifying a partner Contacting a partner Making the case for merger Making the decision to move forward Due diligence Performing a detailed analysis Blending cultures Common Understandings/Negotiations

29 Pre-merger Planning: Setting a strategic goal for growth The Board of Directors identifies growth by merger or acquisition as an organizational goal Formally: strategic plan Informally: board discussions, visioning, planning & establishing a culture of growth The executive staff agency leadership is charged by the board to identify potential merger partners Responses for agencies who have not strategically planned for merger.

30 Pre-merger Planning: Identifying a partner Competitor Analysis: Size Geography Reputation Culture Service menu Budget Profit vs. non-profit How to complete a competitor analysis

31 Pre-merger Planning: Identifying a partner Known relationship with Executive Organizational facilitation (e.g., MAP for Nonprofits) Synergistic opportunities

32 Pre-merger Planning: Contacting a partner Merger Consultant Anonymous contacts to top 3 agency executives Non-disclosure Agreements (NDA) Direct Executive to Executive contact Mail solicitation

33 Pre-merger Planning: Making the Case for Merger In person introductory meetings (when a relationship is not pre-existing) Exploring agency conditions and cases for merger from each entity s perspective What is needed What can be offered Identifying synergies (e.g., where can we be stronger together)

34 Pre-merger Planning: Making the Decision to move forward or not 1) YES: Continue partnership discussions and begin Due Diligence 2) NO: Determine not now or not ever Determine plan for moving forward and terms of future relationship

35 Getting Help for Negotiating and Planning Management Assistance Project for Nonprofits/Due Diligence Legal support Auditing support Role of the Board

36 Pre-merger Planning: Due Diligence and Negotiations Perform Due Diligence See MAP checklist Continue to develop and assess the relationships Building trust Gauging interest and responsiveness Negotiating terms Visioning a common future (roles, structure, culture, etc.)

37 Pre-merger Planning: Do a thorough, detailed analysis Do a thorough and detailed analysis of the other organization. Learn everything you can about their: People Processes Technology Training program Quality Assurance program Client service philosophy

38 Pre-merger Planning: Blending Cultures Visit the offices Observe and interview the staff Watch the day-to-day interactions Avoid casting any judgment or questioning anything the staff is doing On the onset, focus more on the organization, and less on selling all the good things about your organization

39 Pre-merger Planning: Blending Cultures Look for similarities and consistencies between the organizations and bring those to the forefront. Remember: Change is difficult for many people especially in situations where a smaller organization (less than 20) is being acquired by a much larger organization. Talk about similar vision and present examples of how your work culture allows for creativity and individual expression.

40 Pre-merger Planning: Developing Common Understandings Vision Name Surviving organization Governance structure and composition Leadership Office locations Purchase price Timeline

41 Early Leadership Negotiations Building trust Discussing our: motivations desired outcomes desired roles for ourselves envisioned roles for key staff agency structure Negotiating the terms of the purchase

42 The Negotiation Phase Hardest part of the process Sticking issues: Purchase price Unknown costs to seller post-sale Surviving Agency Name Leadership Roles Employment Contract Issues non-compete grounds for termination Is there any part of you that doesn t think this is the right thing to do?

43 Laying the Foundation: Early-stage transition-planning Establishing the framing and philosophy on the partnership Establishing roles Meeting staff and board leadership Building trust Establishing the Transition Team

44 Establishing the framing and philosophy of the partnership We all have something to learn. Let s take the best of both agencies and make an even better one. We don t HAVE to do this, it s our mutual choice. We will share power and leadership We have to handle this change well, or our foster parents and kids won t handle it well either.

45 Getting Everyone Else On Board Meeting agency leadership TTH to Anu Anu to TTH Building trust and rapport Clarifying roles Meeting of the Board of Directors TTH ED to Anu Board

46 Establishing the Transition Team What must be decided before finalizing the deal? What are deal breakers What can wait to be decided together later? Shared leadership/power/investment in the Transition Team Anu s CEO not on the Transition Team Equal ground Place to appeal

47 Stage II: Merger The whole is greater than the sum of its parts. Making it legal: Purchase agreement or other legal documentation Board resolution Board vote Final signatures Celebration

48 Legal documentation Purchase Agreement Bill of Sale Employment Agreement(s) Board resolution

49 What to bring to the Board meeting Case for Merger Common Understandings Due Diligence Checklist and documentation Asset Purchase Agreement Bill of Sale Board Resolution Plan for Merger Employment Agreements Bill of Sale Purchase Price Documentation

50 Stage III: Post-merger Integration Taking the best of both to create something NEW and GREAT. Post merger filings and notifications Establishing the framing and philosophy on the partnership Establishing roles Meeting staff and board leadership Building trust Establishing the Transition Team Blending Cultures

51 Where it Came Together: Transition Team Transition Team: Taking the best of both to create something NEW and GREAT. Leadership & Membership Goals & Priorities Workplan Processes Outcomes

52 Transition Team Leadership & Membership Led by Teipner Executive Director and Anu Chief Operating Officer Membership from Teipner and Anu s middle-management staff Personnel responsible for: Operations/clinical Marketing/branding Management Information System/client data Not the CEO of Anu Equalize power Allow for a place to appeal decisions

53 Transition Team Goals & Priorities Goals of Transition Team: Ensure uninterrupted service provision Take best of both agencies to create a new, better agency Examples: TTH referral process, Anu s CQI process Unify policies and procedures Create clarity and safety for staff, foster parents and youth

54 Transition Team Goals & Priorities Transition Team Priorities (Months 0-3): Human Resources: Benefits, crim checks, termination/hire letter Ensuring development and seamless transition of referral process. Keeping staff updated on progress of transition team. Assignment of new Anu staff to existing Anu committees. Combining TTH office and staff to one Anu office and centralizing paper and computer files. Information technology getting people what they need to do their jobs. Communication plan Transition Team Priorities (Months 1-12) Policy alignment and development Training on Family Connections and TCIF Form revisions

55 Transition Work Plan Legal/Risk Management Licensing Treatment Foster Parents Foster Youth & Their Families Information Technology Human Resources Finance Development and Communications Outcomes and Training Accreditation & Memberships Ongoing Operations

56 Transition Team Processes Matching/mentoring of staff and TFP Regular Transition Team meetings/teleconferences Title change Training Focus on permanence Staff and Foster Parent Teleconferences Use of Existing Anu Committees (Education, Policy, Forms) Development of new committee to incorporate state-level changes happening at the same time Crafting written communication pieces

57 Communication Plan: An issue of timing Developed with Teipner ED and Anu CEO Various Audiences: Staff Foster parents/youth County contractors Referral personnel Billing personnel Leadership Department of Children and Families Partners

58 Technology Equipment Website Access to client records/database Phone lists training

59 Legal, Regulatory & Insurance Official purchase agreement Board Approval Loan approvals Agency insurances Personnel insurances CPA license Foster home licenses

60 Operations and Clinical Personnel needs Risk assessment Policies and procedures Supervision Clarifying, What is the same, and what is different today?

61 Transition Team Outcomes/Progress 10% of the items on the transition plan were completed in June. 40% of the items were completed in July 40% of the items were completed in August 10% were completed in September or later Sept or later, 10% August, 40% June, 10% July, 40% 50% of items completed prior to official merger

62 Post-Merger Integration: Blending Cultures Before the formal classroom training, start with limited coaching and mentoring in their home offices. Shared documents Talk through procedures Emphasize all the benefits that will soon be forthcoming. Get them excited for what lies ahead.

63 Post-Merger Integration: Blending Cultures Emphasize that the existing clients will not be adversely affected. Maintaining a client s trust through the entire process is key. They don t expect to be impacted by this change, and you only have to prove them right. Open, honest and clear communication is absolutely vital at all stages of the process.

64 Collective Wisdom Our Lessons Learned In the end, it ll be okay, and if it s not okay, it s not the end. Spend the time up front in every area, especially in establishing the why and sense of urgency Focus on Culture Engage in activities that engender trust talk to anybody shared referral coordinator Create a cohesive leadership team right people on the bus

65 Anu Family Services: Improving permanency outcomes for youth in TFC Amelia Franck Meyer, MS, MSW Chief Executive Officer Anu Family Services, Inc. or ext. 302 Crystal Peterson, MSW Southern Regional Director Anu Family Services, Inc. or Mark Munzenberger Director of Organizational Quality & Ed GreenPath