Five keys to unlocking value
The number of nonprofit organizations in the United States continued to grow through the boom and bust years of the past decade, increasing 25 percent from 2001 to 2011.1 Yet from 2008 through 2010, nonprofits struggled to maintain funding levels to sustain their programs.2 Not surprisingly, the economic downturn and slow recovery were two key factors. History shows that the nonprofit sector tends to lag the economy by a year,3 and any recovery disproportionately benefits larger nonprofits at the expense of smaller organizations.
But a recovery for nonprofits has been hampered by recent federal and state deficit-reduction efforts – another important challenge to the funding environment. Fewer government grants are available for nonprofit programs and potential reductions in tax credits for philanthropic giving could further affect the availability of private donations.
In the face of these and other challenges, struggling nonprofits could find relief by sharing resources, collaborating, or even merging with other nonprofits. Such opportunities might soften the impact of ongoing economic challenges and afford nonprofits the opportunity to improve operational efficiencies. Yet some may be reluctant to pursue the opportunity – especially a merger with another organization. One reason, although certainly not the only one, might be because the organization's vision and objectives may be tied to a founder who views a merger as a failure and does not want to relinquish control. Whatever the reason, in our experience some nonprofits wait too long to make these tough decisions and either rush into a merger or acquisition at the last minute or close up shop entirely.
The for-profit sector offers many valuable lessons on how to use a merger or acquisition as a growth opportunity – one that can sustain the goals of a founder and provide opportunities for the organization to thrive in the future. Learn more about the five simple considerations can help executives of struggling nonprofits in their efforts to find a viable path into the future.
1 The Nonprofit Almanac, Urban Institute, Washington DC, 2013
2 Giving USA 2011: The Annual Report on Philantrophy, Giving USA Foundation, 2011
3 Nonprofits Team Up for 2011, Sarah Duxbury, San Francisco Business Times, Jan 14, 2011