M&A not the solution for NFPs

The not-for-profit (NFP) sector has been warned against relying on mergers and acquisitions (M&A) as the only solution to the challenges it faces.

The warning follows the release of the Australian Institute of Company Directors’ 2014 NFP Governance and Performance Study sponsored by the Commonwealth Bank of Australia, which found that collaboration and mergers are becoming more commonplace in the sector.

The study, which was completed by Baxter Lawley on Company Directors’ behalf, found that mergers are being discussed by 30 per cent of boards, most commonly, in larger NFPs. The main reason for mergers was to improve existing services, efficiency or broaden the range of services to existing service users.

Twenty per cent of respondents said mergers had been considered in order to make the business more attractive to funders, while 18 per cent said it was in response to encouragement by the government.

Speaking at the launch of the study, Paul Murnane, chair of the Australian Scholarships Foundation and MS Research Australia, said that merging with other organisations could also bring its own challenges. 

“Mergers are not a solution to the not-for-profit sector’s problems; it is just one of a number of tools. To focus on mergers alone as one of the solutions is a little narrow,” he said. 

Murnane continued: “It has been well researched in the US that a lot of mergers do not meet expectations. Admittedly, they might meet financial expectations, but they do not meet the cultural needs and expectations of the merging companies and that is a reason why a lot of them fail.”

Click here to download a copy of the study.