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Too Many Nonprofits, Too little M&A

10 Sep 2019

Nonprofit organizations are facing an increasing number of demands and it’s finding many of them stretched so thin that creativity and strategy are the only answers left to overcome these demands. Government funding is decreasing while costs continue to increase. Regulations are becoming more stringent. Individuals are less inclined to give because of the 2018 Tax Cuts and Jobs Act. All of these issues are added to the preexisting struggles to remain attractive for potential new donors, maintain good funding relationships with historical donors, and find efficiencies to limit administrative spending and have more direct service costs. Above all, nonprofit organizations’ goals at the end of the day are to fulfill their mission, provide their services successfully, be known for those services, and eliminate any open ends to ensure a complete and fulfilling mission overall.

Mergers and acquisitions (M&A) are out of the ordinary in the nonprofit world. Resources are very scarce since it is such a rarity and guidance on M&A in the nonprofit world is lacking. However, if used strategically, M&A can be beneficial to your organization and a great way to gain a competitive advantage in your nonprofit service areas. M&A should be as accepted in the nonprofit world as it is in the for-profit world. In addition to the challenges mentioned above, there are too many nonprofit organizations registered in the United States. Consolidation needs to happen. If M&A became a regular part of nonprofit business, it would be a win for everyone. In a saturated sector of nonprofits where there are not enough people who need the services of the organizations providing them, employees wouldn’t be as few and far between and competition would be decreased, which means more quality employees and donors for you. In the government-regulated sector of nonprofits where a lot of compliance and training is required, consolidation could decrease the time, effort, and cost of that training through shared knowledge and resources.

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