When Does It Make Sense to Merge?

Mergers and acquisitions have become a popular topic among nonprofit groups coming to grips with a radically shifting funding landscape that threatens to leave many without a reliable source of income. A third of U.S. nonprofit service providers lost government funding in early 2025, according to research from the Urban Institute. And 46 percent of more than 400 nonprofits across the country said they were worried they would have to merge or close as a result of funding cuts, a recent report from the Center for Effective Philanthropy showed.

Mergers and acquisitions are also on the minds of funders worried about the future of the sector. Some foundations are beginning to offer to help cover the costs associated with blending staff and operations.

But when does it make sense to consider a merger? And how do you know whether to start the process? Funders, nonprofit leaders, and consultants offered insights on these and related questions earlier this month at the Independent Sector National Summit in Atlanta.

Don’t Treat Mergers Like a Failure

Just 1 percent of nonprofits merge each year, according to La Piana, a consulting firm for nonprofits and foundations that helps facilitate mergers and acquisitions. The last time there was a big push for nonprofit mergers was more than a decade ago during the Great Recession. Meanwhile, the sector keeps expanding. Currently, there are approximately 1.5 million 501(c)(3) nonprofit organizations, and the number of nonprofits has grown 36 percent since 2000, according to Philanthropy Roundtable, a membership association for funders. The sector added nearly 277,500 jobs from 2017 to 2022, according to data from George Mason University. 

Amid that growth, there hasn’t been enough discussion about merging organizations that focus on the same causes, said Onuka Ibe, a managing partner at La Piana. 

“Unlike in the for-profit sector, there’s not the same churn, and so there are just more and more organizations looking for more and more funding,” Ibe said during a panel on mergers and acquisitions at the Independent Sector National Summit.

“Part of what’s great about organizations that think proactively about possibilities  including mergers and also dissolution or winding down or asset transfers — is the more that organizations are able to figure out if they’re not able to do this work and maybe somebody else can, the more easily those resources are available to those organizations that can really make an impact.”  

“Sometimes it’s hard to let go, but it can be better for the sector over all,” he added.

Uncertainty about how funders will react to signs of financial or economic weakness has kept many nonprofits from exploring conversations about mergers, said Tonia Wellons, CEO of the Greater Washington Community Foundation. If mergers are to become more common, funders will need to shift their behavior and let go of the belief that if a grantee becomes unsustainable that somehow leaves the “stain of failure” on its philanthropic backers, she said.

The Greater Washington Community Foundation supports groups in the District of Columbia and parts of Maryland and Virginia, and since January it has been encouraging grantees to begin scenario planning, including mulling mergers, acquisitions, sharing services or programs, or winding down.

“Note that wind-down isn’t a dirty word,” Wellons said.

A common belief in the sector is that organizations need to exist in perpetuity, she said, noting many charities have been around for decades. However, if an organization has achieved its goals or is no longer relevant or sustainable, then winding down or shifting assets to another group makes sense, Wellons said.

Plan Your Process

Because nonprofit mergers haven’t been normalized, playbooks are rare, several speakers on the panel said. Most nonprofit mergers happen under stressful circumstances, Ann Mei Chang, CEO of Candid, a nonprofit that provides data about the nonprofit sector, said. That can sometimes make it more difficult to have robust discussions beforehand about how consolidating the groups can create efficiencies and increase impact, she added.

Candid is the product of a 2019 merger between charity information providers the Foundation Center and GuideStar, a two-year process that brought together each organization’s social sector information and database operations. When the Foundation Center and GuideStar combined, Bradford Smith, who had served as president of the Foundation Center, became president of Candid. Jacob Harold, who had been CEO of GuideStar, was named executive vice president of Candid. They served in those positions for two years. 

But not all nonprofit mergers include such smooth leadership transitions. Often questions about whether CEOs and other leaders will be ousted loom over discussions and can make some groups hesitant to consider the option, said Ami Dar, founder and executive director of the nonprofit job site Idealist.org. That is something that could be addressed early by taking measures like creating severance packages for CEOs, he said.

“In our sector, if two organizations merge, one or two CEOs has to lose their job and neither of them want to, so there is no merger,” Dar said. “The only way to fix that systemically is if funders made it OK to actually give a CEO or funder, three-, four-, or five-year severance for leaving.” Idealist completed a merger with VolunteerMatch, a platform that aggregates volunteer opportunities, earlier this year. Former VolunteerMatch CEO Jude O’Reilley had already stepped down several months before the merger, a move he said in a public letter was made to help cut costs for the organization as it worked to develop a “sustainable path forward.” O’Reilley became a strategic adviser to VolunteerMatch’s board, which he said put him in a better position to raise capital to support VolunteerMatch’s efforts to restructure in the age of artificial intelligence — something that he had long wanted to do.

“VolunteerMatch is essentially a search engine. And search was being dramatically disrupted by AI,” O’Reilley said in an interview with the Chronicle of Philanthropy following the summit. “The idea of needing an intermediary that would provide volunteer information was becoming less and less relevant.”

When O’Reilley stepped down, it cleared the way for an easier transition for the Idealist-VolunteerMatch merger. There wasn’t any need to worry about a CEO losing a position, Dar said.

Keep Funders In the Loop

Engaging with funders early to address issues like severance and to get a sense of whether those funders will contribute to the costs associated with the process was also advised. Mergers are hard, and the biggest challenge is usually around financing, Ann Mei Chang said.

“You’ve got to hire lawyers, you’ve got to do the due diligence, and you’ve got to do all of the integration,” she said. “The financing is really important.”

The merger that spawned Candid was supported with $27 million in funding from major funders such as Bill Gates, Melinda French Gates, Charles Steward Mott, and the William and Flora Hewlett Foundation.

The Greater Washington Community Foundation is one of several grant makers that have been offering to help nonprofits explore mergers in the wake of significant cuts to federal aid. Others include the William Penn Foundation, the Skoll Foundation, and Public Media Bridge Fund. The Silicon Valley Community Foundation also will support mergers through its recently launched Community Lifeline Fund.

“We’re not forcing the conversation of mergers. We’re forcing the conversation of ‘we all need to be thinking about the resiliency of the sector,’ and that can include a variety of things that nonprofit boards and executive directors are going to need to think about,” Nicole Taylor, CEO of the Silicon Valley Community Foundation, said in an interview.

O’Reilley notes that most of these funders are supporting mergers between existing grantees. If mergers are going to become a bigger trend, that means philanthropy will need to offer capital to a broader swath of groups, he said.

Should funders become engaged in a merger process, make sure they agree to keep matters confidential and keep them abreast of negotiations, Tonia Wellons suggested. Most foundations have not previously been involved in nonprofit mergers and would benefit from learning more about the topic, to help ensure their long-term success, she added.

Be Transparent With Staff

Beyond CEOs and other executives, it is important to consider how mergers will affect staff. Often the prevailing idea among organization leaders is that a merger should not be discussed with staff until “it’s real,” but that can lead to fear and uncertainty among employees, said Jennifer Bennett, who was the director of education and training at VolunteerMatch and now holds the same role at Idealist.

“Having heard nothing for a very long time about what was happening — or that there were even conversations or possibilities — was very unsettling for a lot of staff at VolunteerMatch,” she said during the panel discussion. “We did see a lot of attrition, with smart folks going to other organizations. And when you lose that experience, those relationships, those connections, it limits the ability of this merged organization to thrive.”

It’s imperative to try to carry staff with you to the new nonprofit, said Julian Chender, founder of consulting firm 11A Collaborative. The 11A Collaborative works with nonprofits, foundations, corporations and state and local governments and provides services such as organization design and executive coaching.

“Part of your value proposition to the other organization is your staff. They are the knowledgeable ones. They are the ones running your programs,” Chender said. “If you lose them in the process of signing the papers, you’ve lost all your value.”

It’s also critical to ensure that the new organization has been designed to fully integrate and harmonize the processes, structures, metrics, and cultures of both organizations, he said. How you harmonize the organizations’ missions and business models lays the groundwork for developing the new culture for the melded nonprofit, he said.