Inverse of Partnerships: Part 1 - Spinoffs
Hello Tangelo Tree Community,
We hope that you all are finding community and support at this time. Stay with us below the articles – we have a quick reader survey for you, asking about your sources of insight and learning in this unprecedented year.
At Tangelo Tree, we do our best work when we help facilitate decision making processes that require connecting strategy, finance, and structure, so we hope you find this newsletter helpful!
Our difficult political environment can distract us from our values as we try to predict and interpret the actions of a chaotic federal government. In some cases, the distraction rises to the level of direct threat - such was the case with an organization that found its fiscal sponsor in the cross-hairs of the Trump administration.
The situation prompted swift escalation of a strategy that had already been on the organization’s radar – should it spin off from this fiscal sponsor?
In previous posts, we have frequently spoken about the importance of using partnerships and mergers as strategy. Today, however, we will start a series that flips that conversation on its head. Rather than focusing on partnerships and mergers, we want to talk about the inverse of that: spinoffs.
As shorthand, we’ll be using the term “spinoffs” to refer to a number of different types of transactions, all of which involve separating organizations and/or programs.
These can include:
Divestiture from fiscal sponsor
Dissolution of a partnership
Spinning off a program or set of programs to form a new organization
It’s worth giving consideration to the spinoff strategy, as a way to stay true to deep-seated values that may be at odds with the current political climate.
But there are other reasons spinoffs can become an attractive option: Maybe your organization has outgrown the need of a fiscal sponsor or a partnership, or possibly, the mission alignment has diverged significantly from the fiscal sponsor or partner. Maybe something has happened that has undermined the relationship.
Questions to Start With
No matter what the reason is for the spin off, there are several considerations that we want to highlight for you – and these are the exact same considerations we walk organizations through when they are considering a partnership or merger:
Motivation: What is the primary motivation for a divestiture or spinoff?
Vision: What is the vision for increased impact and/or improved operations in the contemplated new structure?
Corporate Structure: What corporate structure would be the best for the future health of all entities?
Governance: What does the governance structure of the spinoff organization look like? How will the divested organization establish and fill a board?
Identity and Branding: How will the divested organization establish its brand and identity?
It may be helpful to get a work group together to begin these conversations, but if you are very early in the thought process, simply start by ruminating on and writing out your preliminary answers to these questions, and consider testing some of your thinking with a trusted colleague.
In the next part of this series, we will be touching on topics such as programs, staff, funding and financials, and facilities for your organization.
Tangelo Tree has found that we thrive in helping organizations shield themselves from the distractions of our current political environment, including attacks of the Trump Administration. As always, if you need help with this process or just need to talk it through to kick off the process, we are here to help. Please visit our website at tangelotree.org/contact to get in touch OR simply respond to this email!
In community,
Tangelo Tree Consulting
Protecting Your Mission Through Financial Scenario Planning
Recently, Tangelo Tree was asked to write an article on Financial Scenario Planning for the Minnesota Council of Nonprofits. This article focuses on protecting your mission through Financial Scenario Planning. Read an excerpt below:
“The challenges nonprofits faced during the Great Recession of 2008 – 2011 remind us that nonprofits are often the last line of defense in uncertain times, and sometimes the first seeds of hope. Nonprofits today operate in similar circumstances —exploding demand, cratering revenue, and threats to survival.
That’s where financial modeling for scenario planning comes in: protecting your mission by strategically planning for risk and resilience. The future will remain too complex to predict, but you can prepare for whichever version arrives with scenario planning.”
If you wish to read the entire article, you can find it here on page 7!
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