Because of the declining economy, many nonprofits are considering mergers in order to survive. A recent survey by the Nonprofit Finance Fund found that almost 1 in 5 nonprofits said they were interested in conducting a merger feasibility analysis, and 5% reported they were planning to or had already undergone a merger. That 5% is in increase from the average merger rate of 1.7% in the for-profit sector and 1.5% in the nonprofit sector over the last decade, according to another report. However, there are pros and cons to mergers.
There are many good reasons to merge: mergers increases a nonprofit’s capacity, expand its geographic reach, and add more donors. In the end, they are more cost-effective because of the consolidation of overlapping services. Donors may view merged non-profits with more favor because it “leverage[s] their own reduced resources and minimize[s] the loss of needed services.”
A few foundations have created funds to assist with nonprofit restructuring while other funders are working to raise awareness.
However, there are also several things to consider before merging.
Merging is a difficult task that often depends on the nonprofit’s leadership placing the nonprofit’s mission ahead of the nonprofit itself. Staff, including some executives, may lose their jobs.
Also, research shows that nonprofit mergers are more likely to succeed when they happen between two organizations with strong leadership that seeks to improve services. When mergers are motivated by financial fears or pressure from donors, they are much more likely to fail.
Yet, these economic woes may encourage nonprofits to have more discussions about their future. The increase of funding for mergers may encourage other nonprofits to go ahead and merge. However, funders should be wary of supporting flailing nonprofits and should instead focus on “mission-driven mergers that seek to improve services as well as the bottom line.”
Information taken from: Bruce Boyd. “Adventures in Philanthropy: To Merge, or Not to Merge?” <www.minyanville.com>.
-- Ashley High is a Research Assistant at Christian Foundation Grants (www.christianfoundationgrants.com) which is a subscription database of foundations that provide grants to faith based organizations. iDonate.com is a website (www.iDonate.com) that allows ministries to receive non cash gifts online