Corporate M&A's Impact Philanthrophy/Local Civic Giving

In the past few months, two major mergers of financial institutions have been announced. While such mega-bank-creating mergers are inherently big news on Wall Street, these mergers also have proven to be big news on the philanthropic front.

In October 2003, North Carolina-based Bank of America agreed to acquire Massachusetts-based FleetBoston for $47 billion in stock. Less than three months later, J. P. Morgan Chase, headquartered in New York, announced the acquisition of Chicago-based Bank One for the price of $58 billion, thus knocking Bank of America out of its newly acquired position as the world's 2nd largest bank behind Citigroup.

With each merger announcement came immediate cries of concern from community groups that fear these mergers will remove necessary resources from local New England and Mid-west economies. Their concerns are legitimate, but not necessarily predictions of what will happen according to corporate leaders.

The philanthropic repercussions of corporate mergers can be significant. The mere mention of a merger makes many think cost cuts. In fact, cost savings are often cited among the main benefits of initiating a merger. When two companies become one, there are often economic advantages (or economies of scale) that result from the sharing and elimination of duplicate resources, such as back office or support positions. It is easy to see how, under these cost savings goals, reductions in philanthropy could be a concern.

However, the reduction in overall philanthropic levels is not the primary concern of community leaders and local nonprofits, but more the redistribution of philanthropic dollars due to the inherent changes in corporate identity.

Bottom line: If your city is on the losing end of the stick with the M&A deal, it may also suffer reduced civic giving by the new merged corporate entity.

Go here to read more.