Page 42 - C&A's Nonprofit Board Guide

TOO MANY NONPROFITS, N onprofit organizations are facing
an increasing number of demands
TOO LITTLE M&A stretched so thin that creativity and strategy Why is M&A a better approach over
and it’s finding many of them
are the only answers left to overcome alternative solutions? Growing an
these demands. Government funding is organization organically is no easy feat.
decreasing while costs continue to increase. Costs and time are generally not favorable
Regulations are becoming more stringent. and geographic expansion requires
Inflation is up more than 21% in the last 3+ knowledge of the population and whether it
years. All of these issues are added to the is in need of your services. Requirements
preexisting struggles to remain attractive could include building an additional
for potential new donors, maintain good location, fostering new relationships
funding relationships with historical donors, with funders, learning skills and building
and find efficiencies to limit administrative knowledge to deliver those new services,
spending and have more direct service as well as beating new competition. M&As
costs. Above all, nonprofit organizations’ are strategic if used effectively. Your
goals at the end of the day are to fulfill their organization would merge with an entity
mission, provide their services successfully, that already has the location, the donor
be known for those services, and eliminate relationships, the skills and knowledge,
any open ends to ensure a complete and and reputation that is known over their
fulfilling mission overall. competition.
Mergers and acquisitions (M&A) are The biggest take-away from this should be
out of the ordinary in the nonprofit world. that M&A needs to be set up properly and
Resources are very scarce since it is such rolled out smoothly and strategically within
a rarity and guidance on M&A in the the consolidating organizations in order
nonprofit world is lacking. However, if for it to be a successful transaction. As a
used strategically, M&A can be beneficial board member, there are a few questions
to your organization and a great way to you should ask yourself, your peer board
gain a competitive advantage in your members, and key management personnel
nonprofit service areas. M&A should be of the organization before a M&A occurs:
as accepted in the nonprofit world as it is
in the for-profit world. In addition to the HOW WILL THIS M&A BENEFIT THE
challenges mentioned above, there are too ORGANIZATION AND THE
many nonprofit organizations registered COMMUNITIES IT SERVES?
in the United States. Consolidation needs
to happen. If M&A became a regular Each M&A is unique and occurs for its own
part of nonprofit business, it would be a specific reasons, but some of the benefits
win for everyone. In a saturated sector, you may find include an expansion on
where everyone is competing for the same geographic influence and serving a greater
resources, it is becoming increasingly population, enhancement of or addition to
difficult for organizations to differentiate services, advancement in reputation, and
themselves. In the government-regulated access to additional resources, just to name
sector of nonprofits where a lot of a few.
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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