How to merge cooperatives

The Rural cooperatives magazine of september-october (pp. 4-9) brings the story of a merger of two American cooperatives in the agricultural sector. Thy conclude by giving some tips & tricks to enlarge the success ratio of a merger of cooperatives:

  • Look for a merger partner whose business type, market approach or culture is similar to your coop’s. This increases the chance of a successful merger.
  • Don’t promise what you can’t deliver. If you don’t know or haven’t decided about key operations, assets or personnel, be honest in telling members, employees or customers, recommends David Holm of the Iowa Institute for Cooperatives. He has advised on nearly 50 coop mergers since 1994.
  • Continually reinforce the need for change. “Don’t underestimate the ability of your good members to understand and adapt to change,” Holm says.
  • Be aware of board egos. “One of the thorniest issues is getting the boards of both coops to create an environment for open, frank discussions about the strengths and weaknesses of both organizations,” says agricultural economist Allen W. Gray of Purdue University. “That’s a big challenge because board members often come in with ego and want their own coop to be the winner. A merger has got to be for the benefit of the members. You can’t make it a competition.”
  • Expect surprises. Due diligence may reveal that an asset is in poorer condition than you thought. Two coops are likely to have different Information Technology systems and software.
  • Determine who the new CEO will be even before the merger vote. There will be two CEOs when talks begin and one when the merger is done. Who that will be should be clear as soon as possible. Also, know what the transition path will be for the CEO who won’t be heading the new coop.
  • Encourage every member to vote on the merger. Remind them their voice—and every vote—counts.
  • Have open, frank and frequent communications with employees. “Merger changes can be disturbing to employees,” Gray says. “The new organization needs a hyper focus on maintaining talent and helping the new culture take hold.”
  • Make changes quickly. “If new branding or a name change is needed, or assets or store locations must be shut down, do it right away,” says Gray. “Don’t let there be a slow, painful death. Focus on the future.”
  • If you must cut staff, do that immediately too, adds Holm. It’s unfair to let employees hang in limbo. “They usually suspect the worst if you don’t tell them, and some will contaminate the attitude of other employees,” he says. “Cut deep and then rehire if necessary. Don’t be afraid to make a clean break with some employees, including ‘sacred cows’ from the old companies.”
  • Don’t underestimate the importance of culture. “Culture can’t be seen on a balance sheet, but it’s a huge part of a merger’s success,” says Holm.


Rural Cooperatives Magazine (September-October 2017)

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