• Collaboration Type: Merger
  • Region: NRF
  • Social Issue: Food insecurity
  • Size of Organizations: > $10 mil
  • BIPOC Leaders: Yes
  • Successful: Yes

The asset transfer of Philly Food Rescue from Uplift Solutions to Share Food Program demonstrates the potential positive impacts of this type of strategic realignment. It benefited the community through the expansion of the program. It helped Share Food Program innovate and expand. Uplift Solutions has re-focused on its mission and diversified its revenue streams due to the divestiture.

Best Practices for social impact organizations:

  1. Consider different types of change of ownership transactions, including statutory mergers, changes of control, or asset transfers.
  2. Rather than building new innovative programs, consider whether you can innovate through acquiring an existing program from another organization.

Outcomes:

  1. More innovation for Share Food Program.
  2. Diversification of funding for Share Food.
  3. Program growth.
  4. Better focus for Uplift Solutions.

Best Practices for Funders:

  1. Fund education on collaboration choices for both boards and nonprofit leaders before entering negotiations.

When many social impact leaders think about mergers or asset transfers, they imagine that at least one of the parties is in trouble. However, savvy social impact leaders increasingly recognize that mergers and asset transfers can be about a strategic repositioning for all parties involved. They can help organizations shift their focus and become more innovative. An asset transfer between Uplift Solutions and Share Food Program in Philadelphia, Pennsylvania, is a great illustration.

Uplift Solutions began as a workforce development effort that addressed food deserts. Their early work was focused on “supermarket development – creating access to fresh, healthy foods in underserved communities,” according to Atif Bostic, President and CEO of Uplift Solutions. In 2017, they helped create a new program to bring food to more communities – Philly Food Rescue. The program rescued fresh, surplus food from restaurants and grocery stores and distributed it to food-insecure individuals and nonprofit partners.

But Uplift Solutions was ready to make a pivot. Bostic noted that Uplift Solutions had become two organizations, one focused on food insecurity and one focused on workforce development. From a business point of view, “we were gaining a lot of traction on workforce development and receiving significant funding for that. But we were receiving minimal funding for the work we were doing around food insecurity.” Sandy Brown, Board Member at Uplift Solutions, explained:

“We were starting to pivot at Uplift into full re-entry work, and as our mission was shifting. We started to think about it. Is this the best place for Philly Food Rescue to be? Were we doing it justice? And if we did to have a divestiture and move it, would it be more beneficial for Philly Food Rescue?”

Finding a Partner

Uplift Solutions began looking at potential partners. They approached two organizations but ultimately decided that Share Food Program was the better fit. Bostic explained that they “looked for both financial stability and fit within the organization’s existing infrastructure. Ultimately, we chose Share Food Program because the internal culture fit with the culture of the existing program.”

The timing was serendipitous. When Bostic approached George Matysik, Executive Director of Share Food Program, they were already looking into the food rescue space. Matysik explained that “going into the food rescue space was something we really wanted to do. We were actively pursuing the technology, and we were actually reaching out to a couple of other food rescue organizations in the area, and we’re also discussing mergers with them.”

In March 2021, both organizations applied for an exploratory grant to investigate the possibilities from the Nonprofit Repositioning Fund, a member of the Sustained Collaboration Network. The grant was to conduct the financial due diligence, determine the asset’s value, develop a business plan around the program, and advise on human resources involved in the transition. Lindsay Kijweski of the Fund remembers reviewing the application.

“What we liked was that this was an existing program that was just not really in the right home. And it wasn’t reaching its potential because it wasn’t in the right home … [Uplift Solutions had the] humility and dedication to doing the work enough to say, ‘we’re not doing this in the best way possible. Let’s find someone who can.’”

Bostic confirmed Kijweski’s perception; “I don’t look at programs as programs. I look at them as an asset to the organization and an asset to the community. It has both economic value and social value. Being able to look at it through that lens, it doesn’t become personal anymore, in the sense that I’m building assets for the benefit of the community.”

Transferring the Asset

Once Share Food Program and Uplift received the grant, Share worked with Laura Solomon, Esq., of Laura Solomon, Esq. & Associates, to do the due diligence and determine the best legal structure to facilitate the transfer of Uplift’s program. Laura noted that in the past 20 years, much of her firm’s work has focused on nonprofit mergers, asset transfers, affiliations, and other transactions that involve a movement or change in control of charitable assets.

Asset transfers, or “grants” of charitable programs and assets are a kind of change of control that is simpler than a statutory merger or change in control transaction where one organization becomes a controlled subsidiary of another. Asset transfers allow the transfer, or grant, of assets from one party to another that, if structured properly, results in the movement of assets without any related liabilities. And because they are simpler, asset transfers require less paperwork, regulatory oversight and approvals, and due diligence. They’re also much faster and less expensive to implement. Solomon explains:

“In contrast to a statutory merger, where we’re merging one legal entity into another, or even a change of control transaction, where liabilities of the merging entity or subsidiary remain and can arise in the future, in an asset transfer there’s no need for a deep dive on due diligence. The scope is much narrower and contained and we focus on due diligence of the program and assets only – rather than the entire organization. In contrast, if your agency is merging with or becoming the parent or subsidiary of another, rigorous due diligence is needed to make sure that the merger partner or affiliate is healthy, reputable, and has no significant or contingent liabilities. That means that we want to see every contract, set of board and committee minutes, all tax filings, litigation reports, every iteration of your articles and bylaws, your IRS Form 1023 Exemption Application, IRS exemption determination letter and related correspondence, employment records, and contracts and donor records.

A subsidiary structure, if done properly, shields the parent entity from the liability of the successor. Nevertheless, we do a level of diligence similar to a merger transaction because, while the parent may not directly inherit the subsidiary’s liabilities, it is taking on the responsibility and oversight of it and will have consolidated financial statements. If there is a contingent liability like a class action lawsuit filed later, or a bank default because the subsidiary didn’t obtain the bank’s prior written approval for the transaction, as required by its line of credit agreement, the parent will have to deal with it.”

Matysik summed it up nicely; “Because it was a merger of a program, we knew that we weren’t bringing in any risk or debt. We didn’t need to worry.”

After the due diligence, Share Food Program and Uplift applied again to the Nonprofit Repositioning Fund. This time, it was for an implementation grant, and the acquisition goals were more precise. The application noted that the collaboration would diversify the food sources that Share Food typically secured, increase Share Food’s last-mile distribution capabilities, and instantly expand Share Food into new territories. The metrics for success were clear: an increase in the number of food donors and the number of pounds of food rescued. Kijewski particularly remembered reflecting on the metrics as a key reason for supporting the implementation grant, “the metrics that they designed for themselves speak for themselves.”

The actual asset transfer wasn’t seamless. The biggest hiccup was bringing the staff from Philly Food Rescue to Share Food. As part of the negotiated deal, all staff from the program were supposed to be retained. But at that time, all the staff at Philly Food Rescue worked from home and all the staff at Share Food Program worked in the office every day. Matysik noted that they made a job offer to “all four staffers with the intention to hire all four, and we included salary raises for everybody. I felt as if, at least from a financial perspective, we were rolling out the red carpet for them. And ultimately, after a lot of back and forth with the staff, only one person ended up coming over.” Ultimately, Share Food Program used the staff turnover as an opportunity to reset the program’s expectations, but it wasn’t the original plan.

A Triple Bottom Line Success

Despite the staff turnover, the asset transfer has been successful for all parties. Philly Food Rescue has continued to expand. Before COVID, the Philly Food Rescue program rescued about 45,000 lbs. a month (excluding some distribution from the USDA Farmers to Families Program). Currently, the program rescues 500,000 lbs. a month, and volunteers deliver around 110,000 lbs. of food monthly.

The transfer has also led to some strategic benefits for Share. Matysik explained,

“It was a benefit for us in a way of when a let’s say, mature technology company acquires a startup tech company. Because we do so many government-based programs that require a lot of paperwork and a lot of government regulations, it prevented us from some boundary-pushing … But with Philly Food Rescue, food doesn’t need any government forms filled out. So probably the best example would be the idea of these community fridges. Community fridges are a great way for us to have 24/7 access … If somebody sends us a Facebook message at 10 PM saying, ‘Hey, I need food assistance.’ we can send somebody over to a community fridge.”

Receiving food from Philly Food Rescue partners allowed more people to access the food, including those who were undocumented and unwilling to sign a form to get food.

Share has also formed new relationships with partners that wouldn’t have been available to them otherwise. Sometimes, that’s been through trying out a relationship with an organization that wants to distribute food. Matysik described the Philly Food Rescue initiative as a great “farm team” for these new distributors. It allowed them to test drive their reliability and responsiveness. If they do well with Philly Food Rescue food, they can use them to distribute USDA food.

Finally, part of acquiring Philly Food Rescue was a technology licensing arrangement with 412 Food Rescue. Although Share quickly outscaled the technology, 412 could “build relationships not quite at a national level, but pretty close to it.” Through that partnership, they’ve formed relationships with some franchise food providers because they can cover their entire service area together.

The acquisition didn’t just benefit Philly Food Rescue and Share Food Program. It also helped Uplift Solutions make its shift. With the divestiture of the last asset, they decided to go through a strategic realignment. Bostic explained, “In 2021, we started the work of realignment after the divestiture of Philly Food Rescue. And then, in 2022, we emerged with a new mission, a new vision for the organization, which focuses squarely on addressing the barriers for justice, impacted individuals and at-risk youth.” The new focus allowed Uplift Solutions to compete and receive state and city funding, diversifying their existing revenue streams. But beyond funding, Uplift has been able to go deep into the re-entry space. As Brown summarized, “Without having this other offshoot in another space, it’s enabled us to stay focused on our mission and aligned everything with just within the re-entry space.”

In sum, the asset transfer of Philly Food Rescue from Uplift Solutions to Share Food had a triple bottom line. It benefited the community through the expansion of the program. It’s helped Share Food innovate and expand. And Uplift Solutions has become more sustainable and focused on its mission. In this case, the asset transfer moved each organization from strength to strength.