Alliance-Based Growth Strategies: Appropriate Choices on the Collaboration-Merger Continuum ASTC 2006 Louisville, Kentucky

Alliance-Based Growth Strategies:Appropriate Choices on the

Collaboration-Merger Continuum

ASTC 2006

Louisville, Kentucky

Alliance-Based Growth StrategiesASTC 2006

Session Presenters

David Heil President,

David Heil & Associates, Inc.

Portland, OR

Linda Silver President & Executive Director,

Great Lakes Science Center,

Cleveland, OH

Chris Cable Executive Director,

The Imaginarium Science Discovery Center

Anchorage, AK


The Strategic Alliance Continuum

Co-Sponsorships Federations Joint Ventures Mergers

Collaborations Coalitions Networks Consolidations

Partnerships Consortia Parent-SubsidiariesBusiness

Combinations

Low High

Amount of Autonomy Relinquished/Level of Risk

Adapted from: John A. Yankey, et al. "Merging Nonprofit Organizations: The Art and Science of the Deal"


Driving Forces Behind Strategic Alliances

EnvironmentalIncreased competitionCommunity desire for consolidationPhysical proximity

ProgrammaticDiversification and/or expansion Gain of market shareImproved quality

ManagerialStrengthen staff and/or leadershipIncreased capacity

FinancialAccess to fundingImproved profit marginEconomies of scaleOptimization of resources


Steps In The Merger Process

Feasibility Exploration

Side-by-Side Analysis

Strategic Communications

Due Diligence

Transactional Agreements

Merger Integration & Transition

Evaluation

Great Lakes Science Center&

Harbor Heritage Society (William G. Mather Museum) Strategic Partnership


Great Lakes Science Center


Mather Museum


North Coast Harbor, Cleveland


The Opportunity

In 1994 and 1996, GLSC leadership writes strong letters of support to the City of Cleveland for a long-term lease for the SS William G. Mather at North Coast Harbor.

Harbor Heritage Society and GLSC jointly undertake a preliminary marketing and financial study of the Mather Museum with Coopers & Lybrand (1997-98). As a result, each Board independently approve resolutions to pursue a partnership once the Society receives a long-term lease for its Steamship William G. Mather Museum.

Harbor Heritage Society’s Strategic Plan (adopted Jan. 2005) suggests potential programmatic and operational synergies between its SS Mather Museum and Great Lakes Science Center, and identifies Dock 32 as preferable permanent Museum location.

GLSC Strategic Plan (adopted Aug. 2005) identifies the Great Lakes/environmental sciences as a top content theme, and further identifies strategic alliances as a broad goal within the Business Plan.

Mather Museum relocates to Dock 32 (Sep. 2005) Joint ticketing and programming attempts prove successful in 2005

with Huntington Cleveland Harborfest Tall Ships Challenge, camp-in and long-term exhibits upgrade collaboration in process (2006)


Key Task Force Observations & Issues

Both GLSC and HHS Trustees Task Force members were excited by potential to enhance each individual entity and to create a “critical mass” on the North Coast.

Task Force members felt that each entity was ideally positioned for greater collaboration and that the possibility of consolidation would resonate well with the funding community.

GLSC Trustees were concerned about liabilities, operational expenses and potential capital expenditures related to the Mather facility (ship).

Harbor Heritage Trustees wanted to ensure that the Mather’s unique identity, historic preservation efforts, and strong volunteer cadres were continued and developed more fully.


Task Force Process

December 2005

GLSC and Mather Museum sign MOU to agree to investigate potential for more formal joint venture, shared services or a merger. Joint Task Force formed.

January 2006

First Task Force meeting Comparison of: Key Metrics; Mission, Vision and Guiding Principles; Recent Strategic Plans, Goals, Changes and New Directions; Historical, Current and Future Relationship and Programmatic Successes and Opportunities between GLSC and Mather Museum. SWOT Analysis of Strategic Alliance options. Task Force observes many parallels and great synergy between the entities.

February 2006

Second Task Force meeting Preliminary Analysis of Full Merger vs. Joint Venture and Preliminary Financial Analysis. Preliminary data indicate full merger may yield greatest benefit to both entities. Decision made that “business combination” best describes desired outcome.


Task Force Process, cont.

March 2006

Third Task Force meeting Detailed financial due diligence Task Force formally recommends presenting a GLSC/Mather Museum “business combination” to the respective Boards.

April 2006

Fourth Task Force meeting Task Force reaffirms “business combination,” along with recommendations on combining personnel, programs and operations Timeline, process and documents for combination established and identified

May 2006

Task Force findings finalized. MOU drafted for June 2006 GLSC and HHS Boards consideration.

June 2006

Task Force findings, recommendations presented to GLSC, HHS Boards.


Joint Task Force FindingsSummary of Financial Analysis

• Acquiring the Mather and its collections does not adversely impact GLSC’s financials.

• As the combination matures, the value to GLSC is expected to increase, as facility rentals, educational programs, special events, marketing, general admissions, and other GLSC cost centers take advantage of revenue-enhancing opportunities offered by the Mather reputation and facility.

• Expenses associated with the Mather facility and operation are offset by revenue from:

Strong history of contributed revenue that is expected to continue and not be adversely impacted by combination Admission fees and greater potential for visitorship

• Initially, there will be no reduction in the combined payroll. Long-term, economies may be realized. Some redundant business expenses will be reduced immediately.


Summary of MOU for Business Combination

1. GLSC assumes responsibility for Mather operations, assets, and liabilities

2. GLSC acquires substantially all of HHS assets and liabilities, including sole ownership of Mather and museum collections and archives

3. GLSC Board Governance Committee will nominate 2 current HHS directors to become directors of GLSC

4. HHS would continue to exist as separate nonprofit corporate entity. With written approval, HHS may fund-raise for Mather on behalf of GLSC. HHS agrees not to compete with GLSC in conducting maritime-related activities and for grants or other funding to support Mather-focused activities.

5. GLSC would contract with HHS for one year following Combination Date to assist with the transition and plan future joint museum activities. Services would be provided by HHS Executive Director who will remain as the sole employee of HHS


Joint Task Force Final Recommendation

The joint Task Force recommends to their respective Boards that the HHS and GLSC move forward with a business combination whereby the W.G. Mather Museum and all assets would be transferred to the GLSC

March 29, 2006Joint Trustee Task Force Meeting


Sequencing the Combination

2006 Timeline

June 1 GLSC Exec Com is asked to approve combination and recommend for Full Board approval at June 2006 meeting

APPROVED 06.01.06

June 20 Mather/HHS Board asked to approve combination APPROVED 06.20.06

June 29 GLSC Board asked to approve combination APPROVED 06.29.06

July 1 - Sept 30

Phase-in of combined operations: employee transfers; ticketing; marketing; operations; finances

Sept 30 Completion and execution of transactional documents COMPLETED 09.30.06

Oct 1 Effective date: Begin operations with fully combined financials (beginning of GLSC Q2); all Mather employee transfers completed

COMPLETED 09.30.06


Media Announcement


Board Leader Perspective

Board members play an essential role in bringing civic and philanthropic community leaders along

Identify one Board member for each organization who has merger experience and can help coach executive leadership through process

Trust is key to success on multiple levels Volunteers and donors are key stakeholders in the deal Takes minimum of 6-9 months for merger exploration, analysis and

due diligence Neutral third party facilitator is important to the process

James D. Ireland III

Past Chair, GLSC Board, Current Chair, W.G. Mather Board


Anchorage Museum Alaska Gallery


Imaginarium

Bubble Lab


Anchorage Museum Art Gallery


Imaginarium

Teen Volunteer


Anchorage Museum Atrium


Imaginarium

Workshop


Imaginarium

Touch Tanks


Experiential, Exploratory, Fun!


Lessons Learned

Start from positions of strength Actively and strategically engage key stakeholders Choose your partners carefully! Be prepared to invest both time and money in the process Clearly define the process and timeline Honor each other’s vision, mission and values Build trust as the first and largest pillar of the foundation Execute a strategic communication plan throughout the process Engage a neutral third party facilitator to guide the process Easier for larger organization to view merger as a “business deal” Smaller organization will view merger in more “personal” terms Larger organizations will be concerned about taking on liabilities Smaller organization will be concerned about loss of identity

Alliance-Based Growth Strategies:Appropriate Choices on the

Collaboration-Merger Continuum

ASTC 2006

Louisville, Kentucky

www.davidheil.com

Documents

Alliance-Based Growth Strategies: Appropriate Choices on the Collaboration-Merger Continuum ASTC 2006 Louisville, Kentucky