The Case for Consolidation (part 2) How to Know If A Merger Is Right for Your Organization
This is Part 2 of a series on nonprofit consolidation. Read Part 1: The Case for Strategic Nonprofit Consolidation if you haven't already.
If Part 1 shifted how you think about consolidation—from "last resort" to "strategic option"—this article is about moving from possibility to evaluation.
Here's what I've learned working with nonprofits across multiple countries: the organizations that successfully navigate change are willing to ask hard questions and accept hard answers.
1. Mission Fit: Defining Your Collective "Why"
The first and most critical filter is articulating the mission-driven purpose of the merged entity in two sentences or less. This is not about what each organization does now, but what you would accomplish together that neither can accomplish alone.
The Test: Write down the two-sentence mission. Show it to someone outside your sector. If they immediately understand how the consolidation creates greater impact, you may have mission alignment. If it takes three paragraphs to explain, you don't.
Strong Mission Fit Example: The Resolution Project and Enactus defined their combined purpose clearly: "We're creating a comprehensive pathway for young social entrepreneurs from initial concept through scaling and investment. Together, we provide support no single organization could offer by combining proven fellowship methodology and global network infrastructure."
Red Flags:
Your primary rationale is "economies of scale" or "operational efficiency." These are outcomes, not mission drivers.
Your board can only reference organizational survival or founder succession as the reason.
The "why" changes depending on the audience.
Key Questions: What specific populations would be better served? What measurable outcomes would improve, and by how much? What could we achieve in 3-5 years as a merged entity that would take 10+ years independently?
2. Market Fit: The Funder Math
This filter addresses the tough conversation about your funding landscape. Research from groups like the Bridgespan Group shows a stark reality: organizations with overlapping funders rarely receive double the funding post-merger. If two organizations each get $\$100,000$ from the same foundation, the merged entity often receives closer to $\$100,000$–$\$150,000$. You may effectively delete $25-50\%$ of overlapping funder revenue.
This is not a punishment; it's a reflection of funders' fixed budgets and priorities. The newly freed-up funds simply go to other organizations in their portfolio.
What You Must Do:
Create a complete list of all major funders (e.g., contributing more than $\$25,000$ annually).
Identify all overlaps.
Have early, transparent conversations with overlapping funders. Instead of asking for a guarantee, ask: "If we were to consolidate, how would you view that from a grantmaking perspective? Would you maintain current funding levels, adjust them, or would this create new opportunities?"
Strong Market Fit Looks Like:
You serve complementary geographic regions or distinct populations with similar needs.
Minimal funder overlap.
Combined, you qualify for large contracts or grants neither could access independently.
Key Questions: What percentage of our combined revenue comes from overlapping funders? What is our honest revenue projection for years 1–3 post-merger, accounting for potential losses?
3. Culture Fit: The Primary Failure Point
Cultural misalignment ends more nonprofit mergers than financial problems do. Approximately $70\%$ of corporate mergers and a significant number of nonprofit consolidations fail due to cultural issues. Culture is often invisible until it's too late.
It's not about complementary programs or modeled finances; it's about how decisions are actually made, what behaviors are rewarded, and how conflict is handled.
The Culture Assessment You Need:
Instead of asking "what's your culture?", ask specific, behavioral questions:
What happened the last time a major program or initiative didn't work?
Describe your worst board meeting in the last year. What was the conflict?
How do staff learn about major organizational decisions?
What from your current culture would you be unwilling to compromise on in a merger?
Build Trust Through Honesty: Successful mergers, like the long process between United Cerebral Palsy and Seguin, often had prior collaboration. If your potential partner's answers are uniformly positive and polished, be cautious. If they can't be honest about their struggles now, they won't be when the integration gets hard.
4. Capability Fit: Beyond the Hand-Wavy
Executives often state, "They're good at programs, and we're good at development." This isn't detailed enough. You must map specific, detailed capabilities across three key areas:
Infrastructure: Financial systems, HR, data systems, technology.
Program Capabilities: Knowledge management, quality assurance, staff training.
Fundraising Capabilities: Prospect pipeline, staff capacity, board giving culture.
The goal is to determine which gaps the merger will actually fill and, critically, what redundancies it will create. Redundancy is not always bad, but it must be budgeted for and addressed in a clear post-merger organizational chart. The problem is discovering redundancy six months in when you haven't planned for it.
5. Model Fit: The Structural Reality
Mission, market, culture, and capability may align, but the deal fails at the structural level if you don't define how it will actually work. This is where theory meets reality.
Key Structural Questions:
Governance: How big is the merged board? Which members continue? Who chairs the new board? What happens to members who are not invited to continue?
Leadership: Who is the CEO of the merged entity? What is the role of the other CEO? What does the new senior leadership team look like?
Program & Brand: Do programs continue under separate brands or one unified brand? Which programs are candidates for sunsetting?
Reality Check: Be honest about the nature of the deal. If one organization is absorbing another due to financial or succession challenges, call it an acquisition. Clear-eyed honesty allows for better decisions about staffing and integration.
The Deal-Breakers List: Before you get emotionally attached, create a tiered list of absolute requirements (Tier 1), strongly preferred but negotiable issues, and flexible elements. This prevents you from wasting months on a fundamental incompatibility.
When to Walk Away and Your Next Step
Walk Away If:
You can't articulate Mission Fit in two clear sentences.
Overlapping funders won't commit to maintaining funding and you can't absorb the loss.
Cultural differences are fundamental and neither side is willing to change.
Deal-breakers emerge that you can't resolve.
The timeline pressure feels artificial or urgent.
Walking away is not failure; it's a display of disciplined strategic leadership.
Your Next Step: Start with market research, not merger talks. Before approaching a potential partner, talk to your top funders to gauge their view on consolidation in your field, consult with peer organizations, and speak to other CEOs who have been through a merger.
Only after these conversations, if you still believe consolidation is the path to greater impact, schedule that initial meeting with the other CEO. Remember, you're dating, not getting engaged. Stay curious, ask the hardest questions, and be willing to hear answers you don't like.
