Nonprofit Mergers and Acquisitions: What Leaders Should Know

The number of nonprofit organizations in the United States has grown significantly in the past five years. But even with that growth, the sector still lacks key infrastructure and resources, especially when it comes to mergers and acquisitions. 

About 1 percent of US nonprofits merge or are acquired in any given year. While for-profit entities have built-in infrastructure to assist with the process, many nonprofit organizations do not. In addition, mergers in the nonprofit sector are often associated with financial distress or succession challenges, which can contribute to a negative stigma.

Still, nonprofit mergers can be effective. According to data collected from various surveys and studies, 92 percent of nonprofit organizations that experienced a merger called it a success. Another study showed a 167 percent median increase in revenue growth, exceeding the typical growth expected post-merger.

During a recent virtual On Board event, Sampriti Ganguli, founder of Ganguli Associates and former CEO of Arabella Advisors, and Matt Weis, president and CEO of National Able Network, discussed their own experiences with nonprofit M&A, the challenges and stigmas surrounding such actions, and how organizations can approach these decisions thoughtfully, strategically, and with mission at the center. 

Merging with Intention

Weis reflected on his experience leading two nonprofit mergers for National Able Network—one with a smaller organization 12 years ago, and a more recent merger with the National Back Office Cooperative. He stressed that a successful merger requires not only mission alignment between the two entities, but also a clear plan for how the newly combined entity will move forward. “It can’t be an emergency that necessitates a merger,” Weis said. “It has to be a proactive conversation.” 

How a merger is communicated is an important piece of the puzzle. Weis said National Able Network emphasized the merger more than the acquisition. Communicating with the board is also key to success. Educating board members about a proposed merger—even if it might not happen—discussing different scenarios, and working through the due diligence process ensures a more aligned and transparent mindset throughout the organization. 

Ganguli added that it can also be helpful to reframe the conversation to focus on what the organization can gain rather than what it can lose. “This merger could accelerate the mission,” she said. “It’s a win-win-win scenario.”

Drawing on lessons from its first merger, National Able Network approached its second merger with greater clarity. Weis noted that attitudes toward nonprofit M&As are starting to change, especially from the donor’s perspective. “Philanthropy today is seeing a need for this to happen more,” he says. “Donors are more inclined to have these conversations. They are willing to help fund a merger.”

The Future of Nonprofit Mergers and Acquisitions

Although donor attitudes toward M&As are changing, there are still uncertainties about the process within the sector. Weis and Ganguli attribute part of the hesitancy to ego. “Some organizations suffer from, ‘What we’re doing is special and our communities are unique.’ But if we can combine resources in a way that those services can be delivered more efficiently, that’s part of us being good stewards,” says Weis.

Weis and Ganguli encourage nonprofit leaders who are interested in pursuing a merger to discuss the concept with their boards and leadership teams well in advance. A merger could be a potential succession strategy, and having conversations about different scenarios in advance can help introduce the topic, destigmatize it, and solidify it as a valuable option if the situation arises.

Resource constraints remain a persistent challenge for nonprofits. But mergers offer one way for organizations to strengthen funding, expand visibility, and combine resources in service of their missions and communities.