Merging on Charities’ Minds – Report

A third of Australian Not for Profits have discussed a possible merger with another organisation in the past year, according to a research released by the Australian Institute of Company Directors.

The 2015 NFP Governance and Performance Study, was conducted by research firm BaxterLawley on behalf of the AICD.

The survey of more than 2900 directors from a diverse range of NFP organisations found that 32 per cent of Boards had discussed a merger in the past year, while 7 per cent actually merged and another 7 per cent were in the process of doing so.

Managing Director and CEO of the AICD, John Brogden, said the figures showed a change in direction for the sector.

“The fact that NFPs are actually entering into mergers – and not just talking about it – is a significant shift from previous years. NFP boards are clearly trying to improve their efficiency to ensure that they achieve their missions,” Brogden said.

“However, directors should note that a merger is not the only option for NFPs who want to better pursue their strategic objectives. Mergers are not the only solution that can deliver a benefit to an organisation.”

According to the report, the push for consolidation was greatest among NFPs with income above $10 million or those operating in social services or development.

Only 15 per cent of organisations with annual income of less than $250,000 had considered a merger and entities in the arts, philanthropy or sports and recreation were least likely to have discussed it as an option.

Julienne Price, Head of Schools and Not for Profit Sector Banking at Commonwealth Bank, which sponsored the survey, said it remained crucial for the NFP sector to continue to look for innovative ways to strengthen its financial foundations to continue to service the community and to maximise longevity.

“Although we are seeing an increase in mergers and collaboration across the NFP sector, financial sustainability still remains the key issue for directors and board members, and is the driving force behind NFPs’ pursuit of greater efficiencies within their organisations,” Price said.

“Diversifying funding sources is just one of the challenges NFPs have had to rise to. We are now seeing many NFPs evolving and adopting new ways to secure funding, such as: making use of innovative technologies for donations, to establishing their own income streams and social enterprises.”

Earlier this month social sector leaders called for at least 100 charities to merge or shut down altogether, saying that an overcrowded sector meant many organisations were competing against each other for the charitable dollar.

In July this year Pro Bono Australia News revealed that on average nine new charities were being registered with the Australian Charities and Not-for-profits Commission every day.

Sector collaboration was also revealed as one of the top priorities for Australia’s Not for Profit sector in the 2015 national State of the Not for Profit Sector survey launched by Pro Bono Australia on Tuesday.

The sector identified collaboration with other organisations as having a positive impact on the performance of their organisation over the past year and that this impact would continue in 2016.