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Charities have long been reluctant to merge, fearful of alienating both loyal donors and longtime employees. But with the number of nonprofits increasing rapidly and donors growing weary of the rise in solicitations, charities are experimenting with mergers as a way to cut costs, reduce duplication of services and increase their reach.
“This is a trend that is going to accelerate,” said Walt Shill, managing director of North American management consulting at Accenture. “Donors are becoming more like investors and expecting a greater return on their nonprofit investments, and many people on nonprofit boards have been through for-profit mergers and see the benefits.”
Accenture recently took on its first nonprofit merger, helping to join the Hands On Network and the Points of Light Foundation.
Both work to find volunteers for community service, and combined will have a budget of over $30 million and 370 affiliates working with more than 80 percent of people volunteering in America each year. The merged group seeks to add 3 million volunteers to the 61 million who volunteered at least once in the year that ended in September 2006.
“We both could have continued along the route we were on, growing incrementally,” said Michelle Nunn, who is presiding over the merger and formerly headed the Hands On Network, “but I believe neither of us would have achieved the kind of exponential change we wanted. I think that’s true of the nonprofit world in general; very few organizations have the scale to tackle the big problems we are all trying to address.”
But experts in the field are not predicting a rash of mergers.
“You have all of the natural tensions you have in a for-profit merger — which leader loses his job, what name to give the new company, whose employees lose their jobs — but none of the incentives, which is to say nothing you can reduce to cold, hard cash,” said Peter J. Solomon, whose investment firm has helped negotiate corporate mergers. “You cannot tell the C.E.O. or board members of a nonprofit board that if you merge, at least your options will be cashed out and you’ll walk away with $300 million.”
Mr. Solomon sits on the boards of several nonprofits, some of which he has tried to get to merge. “We just couldn’t get them to do it,” he said, declining to name them.
A few nonprofits in New York have found a compromise: merging their fund-raising activities. Safe Space NYC, the Children’s Village Inc. and Inwood House have created a separate charitable organization to cultivate donors and solicit major gifts.
“A few years go,” said Jeffrey D. Sobel, director of development at Safe Space, “I started asking how could a social services agency like mine compete with organizations like universities, hospitals and museums that have full-time staff with expertise on planned giving, charitable remainder trusts and other things that bring in big gifts. For us to pay a full-time planned giving person and have a marketing person would be impossible.”
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