Mergers are typically associated with the corporate world when companies combine to expand sales territory, gain competitive advantages, and boost profits. However, merging non-profits can provide similar advantages, including greater financial resilience and lower operational costs.

Over the past several years — particularly since the beginning of the COVID-19 pandemic — many non-profit hospitals and institutions of higher learning have explored and executed mergers. But even smaller non-profits can benefit from the right combination.

Signs Of Success

Successful mergers are based on a foundation of solid motivations. You might decide to merge to establish the stability that will make it easier to pursue your mission. Such a union could lead to a stronger organization that’s better able to survive difficult times. You also might want to merge to reduce competition for funding.

A merger can help non-profits achieve economies of scale that will make the merged organization more efficient, too. This might come, for example, from combining infrastructures — everything from staffing and board leadership to administration, information systems, human resources, and accounting. A merger also could give you access to a wider network, as well as more perspectives and experiences to base decisions on. And it might enable you to provide more programming or add physical locations.

The best mergers usually occur when the two organizations share similar missions, values, and work cultures. That doesn’t mean you and a potential merger partner must offer duplicative services, but you should at least complement each other. It’s also important to have clearly defined goals for the combination and to make prompt decisions to facilitate a swift integration.

Potential Pitfalls

For all of the worthwhile reasons to consider a merger, it’s important to remember that mergers do sometimes fail. One common reason is that the merger itself, as well as the new organization, can cost much more than expected. In the short term, for example, you’ll need to finance transactional and integration costs.

Arrangements intended to rescue a failing organization are another red flag. In this scenario, you usually see a larger, more stable non-profit swoop in to save a smaller counterpart that, despite its weaknesses, has something to offer. But a merger isn’t likely to solve problems such as poor leadership. The better approach in such a situation is for the larger non-profit to acquire assets, or viable pieces, of the smaller organization.

Common Factor When Merging Non-Profits

One critical factor in the success of any merger — for- or non-profit — is the assistance of knowledgeable, experienced advisors. Contact us to discuss your organization’s plans and we can help you assess whether a merger makes sense.