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The Urge to Merge: Benefits of a Merger

Katherine House

Winter 2012

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The Benefits of a Merger—without a Formal Merger

The Kentucky Transpark, a 1,200-acre business and industrial park, accommodates heavy and light industrial manufacturing as well as commercial and retail establishments. It also features educational and training centers, with facilities for Bowling Green Technical College and the Green River Regional Education Cooperative. Photo: Courtesy of Intermodal-Transportation-Authority.

Sometimes, a formal merger between two entities doesn’t make sense. In such cases, a management agreement may result in economic efficiencies without the complications of merging staffs, boards and finances.

That’s what happened about five years ago in Bowling Green, Ky. At the time, the Bowling Green Area Chamber of Commerce led economic development efforts in the area, but did not control the Intermodal Transportation Authority, which owned Kentucky Transpark, an 800-acre business park. When the head of the Transportation Authority took a new job, the time seemed right for the chamber to collaborate more closely with the group, says Jim Hizer, CCE, CEcD, who headed the Bowling Green chamber at the time. Today he is president and CEO of the Pensacola Bay (Fla.) Area Chamber of Commerce.

Finances and cultural differences precluded the possibility of a formal merger. For starters, Intermodal Transportation Authority staffers were public-sector employees, says Hizer. At the same time, operations of the ITA had been financed, in part, by publicly issued debt, which chamber leaders did not want to assume. And, notes Hizer, a “full-fledged merger” can be “more difficult to unwind if it doesn’t work.”

Instead, the boards of both organizations signed a management agreement. Since there were skeptics on both sides, the contract included a 90-day cancellation clause, allowing either party to cancel if it didn’t work out. As a result of the agreement, Hizer oversaw the staffs of both groups. When the ITA had a staff vacancy, the agreement was amended to allow the chamber staff to assume the duties of that employee. “Effectively after three years, we had a complete merger of staffs,” says Hizer. During those three years, the budget of the ITA was cut by more than 50 percent, thanks to the agreement, while the organization continued to provide the same services, according to Hizer.

 

The agreement, it turned out, was the first step toward creating a more unified economic development approach for the region. The Transpark, notes Hizer, was the region’s greatest ED asset. As a result, the chamber’s economic development efforts and those of some of the other counties and cities in the region overlapped. At the same time, not every local government could afford to hire someone devoted to ED full-time, Hizer explains.

The Bowling Green chamber then entered into menu-of-services agreements, allowing different governmental entities to pay only for the marketing/management services they needed. The pooled fees allowed the chamber to add a director of regional development. The fee for service agreements “effectively eliminated competition between Bowling Green and other counties,” he says.

The collaborative effort helped one county attract an Indian company looking to expand into the U.S. The expertise and experience of the ED staff at the chamber allowed the county to land the deal, something Hizer says would not have happened without the menu-of-services agreement. The agreements also resulted in the development of a South Central Kentucky legislative agenda, which provides a more unified approach to requests for aid from the legislature.

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