When a Nonprofit Should Consider a Merger-- A Growing Sector Priority
For several years on my podcast, Around with Randall, I have highlighted the rising predominance of nonprofit mergers (as well as closings). My prediction has been consistent: the sector will experience increased consolidation as a strategic response to financial pressure, changing community needs, and a crowded organizational landscape. Recent data reinforces that this conversation is no longer theoretical. Nonprofit leaders and boards are being forced to reassess long-standing assumptions about independence, structure, and sustainability.
A recent analysis in The Chronicle of Philanthropy underscores this reality. Many service-providing nonprofits have experienced meaningful reductions in government support, with a significant percentage reporting that funding cuts place them at risk of closure or consolidation.
The concern is not isolated. Economic complexity, workforce shortages, and donor concentration trends are creating an environment where organizations must explore new models to deliver on their missions effectively.
A merger is not an admission of mission failure. In many cases, it is the opposite: a responsible, forward-looking decision to preserve services, combine operational strength, and improve impact. Yet only about 1 percent of nonprofits merge each year. Many boards hesitate because the process feels foreign, sensitive, or misaligned with how they believe nonprofits “should” operate.
The sector’s reluctance stems from several understandable concerns. There is the question of governance—who will lead, how the new board will be structured, and what the leadership transition looks like. There is also uncertainty around staffing, particularly when roles overlap or consolidation eliminates duplication. And there are cultural considerations: how two organizations align around mission, values, and program philosophy. And most of the challenges surround a central concept or word---“politics” (small “p”)
Even with these complexities, the strategic upside is significant. When executed well, mergers can reduce administrative expenses, expand program reach, stabilize operations, and strengthen fundraising capacity. Importantly, they can also prevent the negative downstream effects of sudden closures—lost services, fractured donor relationships, and community disruption.
But process matters. Any organization considering merger or acquisition should commit to a disciplined assessment period. This includes financial due diligence, mission alignment analysis, board and leadership evaluation, and a structured integration plan. Communication is also a major factor. When staff, donors, and partners receive clear and timely information, the transition is more stable and confidence remains intact. Conversely, when communication is delayed or incomplete, key talent may leave and donors may pause giving, which weakens the very stability the merger was intended to create.
Another point that deserves more attention is the role of funders. Mergers require upfront investment—legal work, operational integration, technology alignment, and change management. Increasingly, foundations and major donors are recognizing the value of underwriting this work. Philanthropic support can ease the burden and accelerate the benefits, particularly for organizations with tight margins.
Sometimes an organization has reached a logical point in its lifecycle. Sometimes another nonprofit is better suited to carry the mission forward. Sometimes shifting community needs demand a stronger, combined entity. The goal is not to preserve structure for the sake of structure. The goal is to serve people well.
For nonprofits, boards, and executive leaders, the question is no longer whether mergers should be part of the strategic conversation. The question is whether the organization has the courage and discipline to evaluate the option honestly. A merger may not be right for everyone, but dismissing the idea outright puts mission impact at risk.
As the sector continues to evolve, nonprofit mergers will remain a pressing issue—one I expect to grow in relevance in the coming years. Leaders who engage the conversation early, thoughtfully, and strategically will be better positioned to protect their missions and strengthen their communities.
