Nonprofit mergers may increase

March 18, 2009

As nonprofits across the U.S. face the twin scourges of rising demand and falling revenue, more may consider mergers or acquisitions as a way to survive, a new poll says.

During the current recession, about two in 10 nonprofits are considering merging, says a new survey by the Bridgespan Group.

That finding is consistent with an 11-year study of more than 3,300 nonprofits in four states that concludes nonprofits typically merge because of financial troubles or leadership problems.

While the cumulative merger rate of 1.5 percent in the nonprofit sector is about the same as the for-profit sector, nonprofits are much less likely to merge for strategic reasons, the study says.

The 11-year study identifies three factors that predict successful mergers and acquisitions -- a larger number of nonprofits with many small players, significant competitive pressure, and obstacles to organic growth.

While the deteriorating economic climate may lead more organizations down the merger path, nonprofits should carefully consider the strategic rationale for the deal.

"Rather than being viewed as a last hope for some, nonprofits, including the largest and healthiest organizations, need to begin looking at mergers and acquisitions as a proactive tool in key sectors for strengthening effectiveness and making the best use of scarce resources to continue delivering vital community services," William Foster, a partner with  Bridgespan, says in a statement.

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