With Government expenditure shrinking and a drop in people donating, it is vital to support not-for-profit companies so they can continue to help raise funds to support causes which are not funded elsewhere.
In December 2016, the ‘Giving Australia 2016’ project undertaken by the Prime Minister’s Community Business Partnership and the Commonwealth Department of Social Services found that the percentage of people in Australia who donate has decreased from 87% in 2005 to 81% in 20161. It was concluded that there were common responses as to why individuals and businesses no longer like to donate with the four main responses being,
- the Government should be providing the support that is needed through our taxes,
- they simply couldn’t afford give to others,
- they would prefer to volunteer rather than give money; and
- concerns about the privacy of information collected.
Today, there are a number of large, well established not-for-profit organisations which support many worthwhile causes. However, most not-for-profits are unable to reach the necessary scale to have their desired impact. Some reach a level where they are able to do some good work and sustain operations, whereas others are just getting by.
According to the Nonprofit Times (December 2016), one-third of not-for-profits reported that they were unable to meet the demands for services and over half anticipate they won’t be able to meet the demands in the future. Reductions and significant delays in funding during the past year was reported by 75% of not-for-profits.2
Problematically, a great deal of not-for-profits are too small and as the sector becomes more commercial and puts more pressure on funding, they will have insufficient resources to achieve their goals without doing things differently. If not-for-profits don’t acknowledge the future at hand, not only will they be at risk, but the livelihood of the causes and the public they work hard to support will be as well.
If not-for-profits operating in the same sector partnered or merged, particularly organisations dependent on Government funding, it could bring benefits to both organisations. These benefits are not limited to cost saving and efficiencies, but extend to scale, regional coverage etc. and combining provides a larger pool of funds available to develop new initiatives, attract the right people and measure the impact of their work, but most importantly provide resources for the key causes they support.
Some parties may be anxious of a merger, partnership or alliance, and although using other names may create less anxiety among employees and other stakeholders, ultimately one party must be driving the force.
Make no mistake, mergers and acquisitions are long and complicated. They, create a substantial amount of work requiring, Management to dedicate an enormous amount of time to such a complex transaction and the impact it will have on the day-to-day running of the organisation can be easily underestimated by the Board. Despite the complexity, mergers can also bring significant rewards when done correctly.
There have also been concerns around whether not-for-profit mergers and acquisitions meet the financial expectations, cultural and philosophical needs of each organisation involved. These concerns have typically resulted from not undertaking the appropriate due diligence prior to agreeing to partner with another not-for-profit organisation.
The key questions which should be addressed at the outset of any proposed merger discussions to ensure that both parties are aligned include:
- What is the ultimate reason for the merger?
- Are there similarities or differences in cultural, philosophical and management of each organisation?
- Are the benefits of the merger quantifiable?
- Can each organisation continue to grow and provide the same level of services to its market without a merger?
The merger process does not have to be daunting and we hope this encourages not-for-profits to critically analyse their long-term capability to adapt to the rapid changes confronting the sector.