Mergers and Acquisitions: Is the Nonprofit Sector Ready?

Mergers and Acquisitions: Is the Nonprofit Sector Ready?

This is a summary of the original article co-authored by Keshav Kanoria, alumnus from PGP Co '09
Mergers & Acquisitions (M&A) is a common phenomenon in the corporate world meant to maximize shareholder value. Globally, there are several examples of successful nonprofit mergers. In the US, nonprofits are increasingly looking at mergers as a strategic tool to create more impact. Between 1996-2006, the cumulative rate for M&A among nonprofits in the US was similar to that for for-profit firms. A 2015 study reported that in 88% of the cases, merged nonprofits reported being better off in achieving their organisational goals and increasing collective impact. However, in India, the scenario is different. In 2016-17 there were over 600 M&A transactions in India worth USD 61.26 billion but none in nonprofit sector.

In this article, the authors argue the case of M&A as a vehicle to drive greater efficiency and impact in the nonprofit sector.

Merger between nonprofits can bring about benefits to all stakeholders by addressing many of the inefficiencies of India’s nonprofit sector which is large and highly fragmented and characterized by a long tail of sub-scale organisations.

The article lists some key factors that can result in successful M&A amongst nonprofits. However, some important pre-conditions must be addressed to catalyse and execute M&A successfully. With the right intent and approach and thoughtful execution, the roadblocks can be effectively negotiated and donors can play an important role in seeding conversations and supporting their grantees through the process. Large nonprofits and donors are best positioned to take the lead on M&A due to the inherent advantages they have.

The good news is that the past few years have seen collaboration amongst nonprofits, and time is ripe to explore M&A and speed up impact.
Read the full article authored by Keshav Kanoria PGP Co’ 09 and his colleagues at Dalberg Advisors - Varad Pande and Vismit Bansal here.