According to research conducted by the firm Baxter Lawley on behalf of the Australian Institute of Company Directors, if you are currently associated with a NFP, chances are great that your organisation will merge or consolidate with other similar NFPs in the coming years. The firm’s report, entitled the 2014 NFP Governance and Performance Study, was the result of a survey of the directors of more than 2,700 NFP organisations. Together, the surveyed NFP’s had a combined annual income in excess of $15 billion. According to the study, nearly one third of all NFP boards are considering a merger, and one quarter expects to complete their consolidation within two years.

What Factors are at the Root of the Merger and Consolidation Trend?

Several factors seem to be behind this recent push to consolidate services and merge NFPs. As in years past, most directors and boards are focused on areas of challenge that can impact the long term survival of their NFP. According to the study, an overwhelming number of directors identified the ability to achieve financial sustainability and compliance with changing government regulations and requirements as their two greatest concerns.  This is especially true for NFPs that are centred on providing aged care and other social services.

Since many NFPs remain concerned about the uncertainty surrounding future government funding, many are looking to consolidation as a means to continue to provide services in the event of reduced income. The study also suggests that the directors of NFPs are also looking for ways to diversify their income so that they do not remain as dependent upon government funding.

In an attempt to reduce or remove the uncertainty about upcoming governmental changes, over 78% of directors report that they have called on the Australian government to consider the long term needs of the communities that NFPs serve and to clarify within the next three years the proposed changes and reforms that the government plans to make to their policies and legislation.

Does Your NFP Have a Plan to Merge or Consolidate?

Is your NFP considering a merger or consolidation? Why not let us know in the comments section below if your NFP will be joining this trend, and what factors are driving your NFP’s decision?