Four months after announcing his organization’s intentions to merge with be.group, ABHOW President and CEO David Ferguson has some advice for colleagues on the nonprofit side of senior living: Don’t be afraid to take risks.
Exploring affiliation opportunities with other senior living providers can lead to benefits such as improved efficiencies and access to capital, which can enable nonprofits to serve their residents better and be more competitive with for-profit entities, he tells McKnight’s Senior Living in an exclusive interview.
“The nonprofit sometimes lacks vision, and I say that understanding that, we, being nonprofits, invented this business. It wasn’t the for-profits,” Ferguson says. “Assisted living didn’t exist until 20-some years ago. We invented it, and the for-profits took it over, because they’re not afraid to take risks, and most nonprofits are.”
Ferguson took a chance more than five years ago when he first approached be.group about a potential merger. At that time, consultants identified weaknesses at be.group, he says, but the two companies resumed discussions once those weaknesses had been addressed. Each organization is established and healthy and expects to be made stronger by joining forces, he adds. The combined entity would be the largest senior living organization in its home state of California and the sixth largest in the country, with more than 3,500 staff members serving more than 10,000 residents in more than 80 communities.
Since the July announcement of the planned merger of the $250 million American Baptist Homes of the West and the $150 million be.group (which changed its name from Southern California Presbyterian Homes in 2011), Ferguson says, he and be.group President and CEO John Cochrane meet regularly. Consultants have prioritized tasks and recommended ways to align strategic plans. Representatives from the two companies have been discussing how to streamline their boards and integrate technology and processes related to IT, accounting, human resources, dining services, marketing and other segments of the business. Depending on the technology or process, options being considered include proceeding with one of the companies’ current vendors, selecting a new vendor or managing the service or process in-house. “We’re looking for best of breed,” Ferguson explains. Company representatives, he adds, also are looking at policies and practices related to matters such as paid time off, car allowances and 401(k) matching, as well as the foundations related to the companies.
Although Ferguson doesn’t expect any layoffs of rank-and-file employees — “We need everybody, and for the short term in particular, we’re going to need not only the people we have but probably additional people,” he says, because of the tasks involved with the transition — he admits that overlaps exist at higher levels in the organizations, which ultimately may be thinned.
One topic Ferguson says those at the organizations are not spending much time on at this point is the eventual name of the combined entity. “We can’t have a financing event jointly until 2020 anyway,” he says, adding, “We don’t want to divert focus and energy away from putting the right systems in place. My personal approach is, how can you brand something if you don’t have something to sell?”
Internally, Ferguson says, plans are proceeding smoothly because the organizations are aligned well and “everybody has been focusing on the prize.” The companies have encountered some external complications, however. In California, retirement and continuing care retirement communities are regulated by the state Department of Social Services and the Office of Attorney General. ABHOW has submitted 3,500 pages of merger-related documents to the state, Ferguson says, but the companies have faced challenges due to changing state personnel and differing interpretations of the meaning of statutes.
Ferguson says the organizations still hope to complete the merger in the first quarter of 2016, however. “If this gets further delayed, it starts to threaten my retirement plan,” he adds. Ferguson plans to retire in spring 2017, having been CEO since 1995 and with ABHOW since 1992. Once the merger is complete, he will serve as an adviser to the combined organization until his retirement. Cochrane, who joined be.group in 2009, will lead the new entity.
Even if merger plans fall through, however, “both organizations are going to be better, and better off, because we’ve learned from each other already,” Ferguson says. Nonprofits may not be big risk-takers, but they excel at sharing information, he notes.
In the meantime, as ABHOW continues to discuss potential affiliations with other companies, Ferguson says that negotiations between his organization and be.group could serve as a model for other entities contemplating mergers.
“Nonprofits have a tendency to talk and not act,” he says, “and so my message to my peers is, this is a model that you can follow. You can join us, or you can do it yourself, but I think there’s lots and lots of advantages that overcome the tendency to be parochial. … We’re doing the same thing, and we ought to be looking for ways to be more efficient.”
Lois A. Bowers is senior editor of McKnight’s Senior Living. Follow her on Twitter at @Lois_Bowers.