A Call for More Mergers in Nonprofit Journalism

How to think about the possibilities-- and the pitfalls

Welcome to Second Rough Draft, a newsletter about journalism in our time, how it (often its business) is evolving, and the challenges it faces.

I am among those who have long believed that there is far too little merger and acquisition activity—“M&A”-- among nonprofits generally, and nonprofit news organizations in particular. New groups spring up, which is inspiring, but most do not ultimately succeed on their own, which is inevitable.

When new groups prove unable to reach the scale requisite for success, or when their entrepreneurial founders simply burn out, too many initiatives are left to wither, rather than reaping the considerable journalistic value that has often been created. Frustrated innovators recognize less often than they should that a merger can be a successful outcome, a way to partially achieve the dream on which they initially embarked. That this may become a widespread need is illustrated by the fact that, according to the numbers on their homepage, the average number of staff at the 360 members of the Institute for Nonprofit News is about seven or eight people.

you don’t need to be huge for a merger to make sense

This week I want to offer some thoughts on why mergers can make sense, as well as things to watch out for in pursuing them. The mergers I mostly have in mind are between independent nonprofit news organizations born in this century. A special class of deals, involving public radio stations, raise a number of issues and opportunities that I don’t intend to address here, but some of these have offered promise, and are addressed smartly in this excellent piece from NiemanLab. The most recent, in Chicago, where the owner of the struggling Sun-Times newspaper contributed it to the powerhouse WBEZ, is especially worth watching.

Reasons M&A can work

Combining organizations, or even parts of them, can yield efficiencies, particularly in sharing infrastructure and other support services. More generally, as newsrooms grow their budgets (and presumably corresponding revenues), the size of the “rounding error” that managers can afford to ignore (or play with) grows. Very small budgets leave very little margin of error; much larger budgets yield the advantage of not having to sweat over every nickel. This is not an excuse for waste, but it does give greater rein to creativity.

Beyond simple efficiencies and greater flexibility, adding complimentary newsroom capacity through M&A can also have the effect of diversifying both content and the funders (or at least potential funders) to which that content may be compelling. For instance, as Evan Smith suggested in his recent tribute to his retiring colleague, Ross Ramsey, the Texas Tribune, the nation’s biggest success to date in local nonprofit news, began with a merger of sorts, the incorporation of state capitol veteran Ramsey’s Texas Weekly.

How to think about a possible merger

If you’re considering a newsroom merger (or just want to ponder one as a thought exercise, which I encourage), it’s essential to begin by focusing on not just how such a deal would work from the perspective of your organization, but also from the perspective of your possible partner.

Of course, your thoughts will naturally run first to what you might gain (more scale, greater capacity, perhaps some dedicated funding previously granted to your partner) and lose (redundant employees? one of the brands involved?), but you should also look at things from your partner’s side of the negotiating table. How do they likely see you? What are their motivations in considering a deal? Do you each know enough about the other from the outset, or is an exchange of deeper, perhaps nonpublic, information necessary before you can each reach informed judgments?

This combo of seven original newspapers lasted eight months. Mergers out of mutual weakness rarely succeed. But the Gemini link worked out well.

Things to watch out for

I began by saying I think there have been too few mergers so far in this field. (One recent exception, which seems quite promising and smart to me is the just-announced merger between Detour Detroit and Outlier Media, where I am on the Board.) But I do want to offer some cautions if you’re considering your own bit of M&A:

• The greatest risk comes from the possibility of clashing cultures. If you find this as you consider a deal, an acquisition may still be possible, but a successful true merger probably isn’t;

• Mergers out of mutual weakness are also rarely successful. At least one partner likely needs to be on the upswing;

• If you see that your own organization may be running out of time (likely meaning cash), the time to start not only thinking about a deal, but actually getting to work talking to people about it, is now. These things can take longer to arrange than you might imagine;

• At or before your announcement of a deal is the time to identify and trim any redundancies it causes. Waiting will only prolong the pain;

• Resist any temptation to fuzz up who will be in charge of what post-merger;

• Be clear-eyed in taking advantage of varying strengths, for instance making sure the most effective practices and systems employed by each participant survive in the new entity, not just the ones controlled by the remaining players; and

• Think through in advance the likely reception of any deal across the full range of both parties’ stakeholders, from Boards, to staffs, to funders, to partners and ultimately readers.

Second Rough Draft will likely be off next week, returning April 7.