Mergers and acquisitions (M&A) among nonprofit organizations are not just a way to survive but can be a powerful tool for growth. When two or more nonprofits join forces, they can create a stronger competitive alternative, navigate obstacles standing in the way of future growth, and achieve efficiencies in administration.
In this article, we will explore the benefits of M&A for nonprofit organizations. We’ll look at how new funding streams, innovation, cost savings, diversity of thought, and administrative efficiencies can be gained through M&A deals. Additionally, we will discuss how these deals can create a more pronounced and sustainable impact on health, education, environment and sustainability, the arts, and human services.
Reasons Nonprofits Avoid M&A
One reason nonprofit leaders avoid mergers and acquisitions is a belief that the nonprofit sector is innately different from the for-profit world. Yet many nonprofit organizations are already engaging in M&A activity, whether they realize it or not. For example, two nonprofits may decide to share office space or consolidate their back-office operations. Another example is when a nonprofit co-sponsors an event or program with another nonprofit. Nonprofit organizations can benefit from mergers and acquisitions (M&A) in many of the same ways as for-profit companies.
In fact, nonprofits may have more to gain from M&A than their for-profit counterparts. That’s because nonprofit organizations are often driven by mission more than profit. When two nonprofits with compatible missions merge, there is an opportunity to amplify the impact they have on the communities they serve.
4 Benefits of M&A for Nonprofit Organizations
There are several key benefits that nonprofit organizations can realize by pursuing mergers and acquisitions. One is the ability to tap into new funding streams. A merger or acquisition can create opportunities for an organization to access new donors, diversify its revenue sources, and secure additional grant funding. When two nonprofits merge, they can pool their resources and better leverage their fundraising efforts.
Another key benefit of M&A for nonprofits is innovation. By bringing together two or more organizations, nonprofits can create an environment that is conducive to innovation and creativity. Impactful innovation is more likely when organizations with complementary strengths and similar missions come together. For example, a nonprofit that specializes in providing direct services to people in need can merge with another nonprofit that has expertise in policy advocacy. This can lead to the development of new programs and services, as well as more efficient ways of delivering those programs and services. The resulting organization is better positioned to effect change on multiple fronts. It can also be more agile and responsive to the needs of the community it serves.
In addition to new funding streams and innovation, nonprofit leaders should also consider the potential for cost savings when evaluating M&A opportunities. By consolidating operations, nonprofit organizations can realize economies of scale and reduce duplicate costs. For example, two organizations that merge may be able to reduce their overhead costs by sharing office space or eliminating duplicate administrative positions.
Finally, nonprofit mergers and acquisitions can also bring together diverse perspectives and ideas. By bringing together organizations with different cultures and missions, nonprofits can create an environment where new and innovative ideas can flourish. Developing a diverse culture of innovation can help nonprofit organizations attract new talent and ideas. This diversity of thought can lead to more effective and efficient operations, as well as a greater impact on the communities they serve.
Conclusion
Nonprofit leaders should view mergers and acquisitions not as a last resort, but as a strategic tool that can be used to achieve a more pronounced and sustainable impact. When done correctly, M&A can offer a number of benefits that are unique to nonprofit organizations. These benefits include new funding streams, innovation, cost savings, diversity of thought, and administrative efficiencies. By pursuing M&A opportunities, nonprofit leaders can position their organizations for more growth and greater impact.