According to the most recent statistics about non-profit mergers, there has been little change in the rates of non-profit mergers between 2007 and 2012. While some mergers do take place every year, there is evidence that non-profits are indeed lagging when it comes to merging. First, let’s consider the reasons the non-profit industry as a whole should take this option seriously, and then let’s look at the ways in which they can make the process easier.
4 ways Non-Profits Can Benefit from Mergers
It seems that every day for-profit companies are acquiring other companies or merging with them. Yet when it happens in the non-profit field it’s big news. There are many arguments about why non-profits seem to be behind in the world mergers and acquisitions, but one thing is certain: it’s not because non-profit consolidation doesn’t make sense. Consider these four reasons non-profits should take the option seriously.
1. Economy of Scale
Economy of sale is often the most obvious reason for nonprofits to merge. Whether they’re a startup with a $100,000 yearly budget or an established charity with a $10 million budget, it makes financial sense to have a single CEO, CFO, head of fundraising, phone system, CRM system, accounting system, HR department, and document management solution.
Economy of scale is almost always the first reason given in the corporate world, and though it can be overstated it does lead to a significant cut in overhead. When it comes to nonprofits, it’s not just money that’s saved: manpower and other resources can be better aligned with what an organization really needs.
2. Avoiding an Overlap in Missions
When several non-profits serve the same need in the same area, there’s no way around hurting each other’s ability to raise money, to recruit the best staff, and to best fulfill their mission. Even if organizations have missions that only overlap slightly, it’s worth considering if combining them would make sense. It may end with mergers and acquisitions, or it may result in a more narrow focus for both of their missions.
3. More Fundraising Opportunities
Combining non-profit databases allows duplicate accounts to be deleted and to avoid redundancy in the communications structure as a whole. As a result, the quality of communication can be improved. A consolidated team can have fundraising specialists in essential areas, like planned giving, annual fundraising, major gifts, and special events.
4. Leadership Opportunities Are Increased
When consolidation happens there are will be numerous boards and committees involved. These talented individuals can be better used on new committees designed to address issues that were being ignored, and the new discussions that emerge from them allow organizations to get at the best possible ways they can handle any given situation. The best members of the boards will quickly rise to the top of the new committees, while any members who weren’t pulling their weight can be moved on.
The Reasons Non-Profits Fail: And How to Avoid that Outcome
A report from 2009 showed that merging created more value in the nonprofit sector than many people realized. While some years have passed, the ideas in that report are still valid. Of course that success is not without its risk. Here are some of the reasons nonprofit mergers and acquisitions aren’t successful—and simple ways to avoid them.
- The organizations don’t fully understand mergers and acquisitions. It’s important for non-profits to work with experienced business leaders who understand the ins and outs of mergers and acquisitions. The reality is that they are complex legal maneuverings, and without proper planning and a deep understanding of the issues involved, mergers simply aren’t a good idea.
- Lack of funding for post-merger integration and due diligence. Almost anything that significantly changes the way a company does business is going to have short-term costs. This is also true of mergers. All non-profits involved in a merger should carefully consider their current financial situations, future projections, and the estimates for integration and due diligence.
- Not integrating information management. If there’s one thing we can all agree on, it’s that workers don’t like changes in the way they do their work. This is especially true with talented staff that’s been on the payroll for years. It’s far too common for non-profits to merge but retain their own information management, which generally aren’t compatible with each other. The better option is to select one document management system and for all non-profits involved in the merger to embrace it. This allows them to easily share information and to utilize role-based security permission that keeps confidential documents secure and provides mobile access to critical documents.
It’s easy to see that document management systems can play a huge role in the success of a non-profit merger. By streamlining the consolidation process, and providing an opportunity to improve efficiency, organizations can hit the ground running and better combine their assets.