Mergers in Non-Profit Organizations

A merger occurs when two or more organizations decide to join forces and become one organization. One or more organizations must dissolve for this to happen. Sometimes all involved organizations dissolve and take on a completely new name. Sometimes one organization survives, and keeps their name, while the dissolved organization(s) must fall into the surviving organization's business structure. In the for-profit sector, this latter situation would be considered an "acquisition". However, in non-profit organizations, there are no owners. Therefore, since the ownership of another organization cannot be acquired, legally it would be considered a merger (Strategic Restructuring).

There are two types of mergers: horizontal and vertical. A horizontal merger is one that occurs when two or more organizations with similar goals, missions or interests merge together to create one organization. A vertical merger is one that occurs when two or more organizations with different missions come together. Usually, the services they offer can work together in some complimentary way. Horizontal mergers are more common in the non-profit sector (An Itch To Get Hitched).

The overall goal of a merger in the non-profit sector is to create synergy. This means that as a whole, the merged organizations will work more efficiently or with greater quality than the sum of its part did separately. Other goals for mergers may include strengthening services, pooling resources, reducing duplication, lowering costs, and establishing a larger geographical presence. Under the right circumstances, a merger could be very beneficial to a non-profit organization, and to the individuals they serve.

Probably the best reason to partake in a merger is to reduce duplication. There are currently close to 1.4 million non-profit organizations in the United States. It is difficult to believe that each organization has a different and unique mission. For that reason, it makes sense for some of these organizations to merge in order to help more people, and to prevent competition amongst each other. Competition is not a force that should be present in the non-profit sector, since the missions of each non-profit are designed simply to help people. Unfortunately, in order to do that, all non-profits need funding. While it is difficult, especially for smaller organizations to raise money, it is even more difficult to raise it if they are competing for funds with another non-profit. This causes both organizations to miss out on the potential to help more people (Commentary: Nonprofit mergers could help more people).

Mergers are being called a "hot-topic" right now in the non-profit sector. Organizations across the nation are either in talks, or rumored to be in talks, to negotiate a deal for a merger. However, this does not necessarily mean that many organizations are following through with the merge. It just means that many are thinking about it.