Better Together? Nonprofit Mergers

In light of the challenges facing many nonprofit organizations, the process of merging nonprofits in order to preserve resources has become more common. Mergers are a common feature in the business world but are often not considered by nonprofits. Nonprofit mergers can maximize the impact on communities and make better use of limited donor resources. This blog will offer some insight into nonprofit mergers, why they happen, and their role in creating sustainable organizations. 

Nonprofit organizations set out to serve communities across the country in order to offer their services to those who need them. When a crisis hits, such as the COVID-19 pandemic and subsequent economic fallout, some of these organizations suffer critical damage and unfortunately cannot recover. Rather than lose what they have left and give up on their efforts, it has become increasingly more common for organizations to merge with another, similarly focused organization that has more resources and stability. While many nonprofits work toward common goals, they often discuss mergers with apprehension. This averseness to mergers arises because so many nonprofits are created based on personal experiences and individual beliefs, yet a quick scan of your community often reveals several organizations with the same beliefs and goals. It is important to remember that the world is rapidly changing and setting your sights on the creation of a permanent institution may be overzealous and actually limit the potential for achieving your mission. 

If the leadership of two nonprofits decide that merging operations is the best path to better accomplish your common mission, there are two routes organizations can take in order to combine into a single entity. The first process involves both nonprofit boards agreeing to dissolve their respective organizations and then form a new organization, combining the resources from both organizations under a new name. The second and more common path to merging involves one board of directors voting to dissolve and transfer its assets to another organization. The process involves complexities that typically require legal counsel to ensure compliance with state law. The organizations must contract a merging plan detailing the governance, board structure, transfer of assets, name, and addresses. Additionally, a new organization comes with new policies and bylaws. Mergers are by no means simple or even cheap means of restructuring, but if coordinated well and at the proper time, they can create benefits for nonprofits and communities alike. 

Nonprofit mergers also support the sustainability of services from nonprofits. Nonprofits do not have to suffer serious financial damage to consider a merger. When many nonprofits serve a community it may seem like redundant services, but it is more likely that there is redundant infrastructure. Most communities need more nonprofit services not less whether it is educational services, homeless shelters, food pantries, elderly care, or public safety awareness; the issue is not too many services being offered but rather too many independent organizations offering services. That may seem like the same concept but when a number of organizations offer the same services they are creating redundant administrative infrastructure. Each organization expends resources on accounting, human resources, executives, and a board of directors. These are redundant roles and ones that often strain nonprofits. By combining organizations striving to accomplish the same mission, the duplication of organizational infrastructure is eliminated and no longer strains resources, resulting in more efficient use of donor dollars. 

As an increasingly common occurrence in the nonprofit industry, mergers ought to be considered as a realistic and effective strategy for maximizing limited resources in order to create the greatest benefit for those in need. With increasing competition among nonprofits for resources, funders and executives alike are recognizing the power of mergers to save threatened nonprofits and create sustainable practices. In a new insights series, NMBL will explore examples of nonprofit mergers and offer insights into the process. Look for this new insights series here in the blog section debuting in October 2020. 

Using their extensive experience working as nonprofit and small business executives, the NMBL Strategies team is equipped to guide nonprofits toward more sustainable business practices and more substantial impacts. Learn more about what the NMBL team has to offer by contacting us today at info@nmblstrategies.com.