CEDPA, created almost 38 years ago, is an international NGO based in Washington, D.C. It was one of the very first organizations to focus specifically on issues relating to the development and advancement of women and girls.
Acquisitions are rare in the nonprofit world, perhaps for good reason. They are risky. Our donors entrust us with their money to do good in the world, to have an impact, to transform lives. While donors understand that our organization will need to take risks to tackle the big development problems of the day, they did not necessarily sign up to take on the type of risks that come from mergers and acquisitions (M&A). An acquisition could put the acquirer’s financial soundness at risk, potentially dilute the mission, or create reputational hazards. So why did we proceed with this acquisition?
The key driver in this transaction was programmatic impact. CEDPA’s program focus includes girls’ education and youth development, increasing access to lifesaving reproductive health and HIV/AIDS services, and strengthening women’s leadership. These are critical to Plan’s ability to address the unique challenges facing girls around the world. We proceeded with CEDPA because we believe the acquisition will enhance the effectiveness and impact of Plan’s Because I am a Girl campaign.
We could have brought this expertise in-house without an acquisition by hiring or outsourcing to organizations that have the proficiency and qualifications. But by bringing CEDPA into Plan, we bring more than expertise around a specific set of issues. We bring in tools, relationships, and systems and structures that support programs – and we bring it all at once so we can have the impact in the near-term, rather than building it up from scratch over a longer timeframe. Though Plan International USA is the acquirer, we believe that Plan can learn a lot from how CEDPA does things – like design activities and manage projects – not just from what it does in the field.
We welcome this.
Someone asked me what the biggest difference was between M&A on the nonprofit and the for-profit side. The answer is easy: money. Money can facilitate many things. It helps smooth over a number of potentially big bumps on the road like trailing liabilities and assignment issues. With money, you can craft buyer protections, indemnifications, and “claw-backs.” None of these things are really available – or available to the same degree – if no money is changing hands, as was the case here and is typically the case in these deals. But if money can smooth over, it can also gloss over. Precisely because we did not have dollars facilitating things, we spent time on the less tangible elements of the transaction like culture and mission.
Plan has taken its time. We carried out careful and thoughtful due diligence. The due diligence included not just a review of the financial position; staff skills and capabilities; project scopes and finances; and legal and liability issues surrounding the organization, its subsidiaries, and projects; but also a careful consideration of how our two organizations’ missions align and complement each other, and a careful consideration of our cultural fit.
Does this mean that we will not have any hiccups? I doubt it. But we are coming into this “deal” with a realistic set of expectations.
I think our sector will see more of these transactions in the future. These are potentially very useful tools to use as part of a broader strategy that seeks to strengthen the organization. More often than not in our industry, however, they are part of defensive postures to address imminent challenges to survival. Before these transactions become more common as tools to drive impact and efficiency, there are a number of cultural and structural barriers in our industry that will have to be overcome or addressed.
Mechanisms like bankruptcy are either unknown or underappreciated. Perhaps this is in part because the agreement NGOs have with their donors, who capitalize them, is not “take the risk with us, and benefit from the reward if we are successful” but “let’s do some good.” Moreover, donors do not take enough of an interest in the financial health of their recipients. As long as an organization can continue to attract donor funds, there will not be much of an incentive to look for greater efficiency through a merger, for example.
We are very excited about the potential this transaction brings to not just Plan International USA but the entire Plan federation. Turning this potential into a reality is the hard work that lies ahead. We are very much looking forward to that challenge.