Strategic Mergers

Mergers are not for everyone. But nonprofit boards with closely aligned missions should ask whether their missions are best served by standing alone.

…Longer term, say many nonprofits, the decline in donations to charities appears likely to continue. The sector’s difficulties are re-awakening a touchy debate among some leaders in the nonprofit world over whether the economic prosperity of the past few decades has spawned an excess of nonprofits.

With the bar to getting tax-exempt status low, the number of nonprofits registered with the Internal Revenue Service doubled to 1.5 million organizations, employing about 12 million people, or 10% of America’s work force, over the past 15 years. Organizations range in size and substance, from the 1,300 local United Way charities to the Grand Canyon Sisters of Perpetual Indulgence Inc., whose members dress in drag to raise funds for HIV/AIDS.

“There were too many poorly performing nonprofits,” says Paul C. Light, a professor at New York University’s Wagner School of Public Service. “There were very many niche nonprofits devoted to small slices of a problem and they needed to be merged.”

With growing demand for a declining supply of donation dollars, some donors are arguing that there are too many organizations providing similar services. Merging or collaborating may allow them to more effectively solve the problems they aim to address.

Read more at Recession Forces Nonprofits to Consolidate – WSJ.com.