Nonprofit Mergers and Acquisitions

According to a a new study, reported in the Chronicle of Philanthropy and available in full text here:

Mergers and acquisitions (M&A) are much more common in the nonprofit world than most would think, as our study of 3,300 deals across four states over 11 years shows. But nonprofit mergers often come about through default—due to financial distress or leadership vacuums. At the same time, relatively few nonprofits are using M&A strategically, as a way to strengthen organizations’ effectiveness, spread best practices, expand reach, and to do all of this more cost-effectively. Yet the potential for M&A to create real value in the nonprofit sector exists, particularly if more philanthropists take on the mantle of matchmaker and help nonprofits explore and evaluate M&A opportunities. This article discusses research conducted by the Bridgespan Group on nonprofit M&A; explores the Child and Family Services (CFS) field, where “market” conditions are especially favorable to combinations; and profiles two nonprofits making the most of acquisitions. It also issues a call to action to philanthropists to further strategic, social sector M&A.

There must be all sorts of “cultural” and tax issues that must be worked out with regard to nonprofit mergers and acquisitions.  This report suggests that economic conditions will increase nonprofit M&A activity over the next few years, and thus the need to carefully plan for the hidden issues.

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