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Key takeaways:
Financial and regulatory pressures are forcing providers to reassess viability, with funding cuts, rising costs and increasing insolvencies making scale and sustainability critical.
NDIS reforms are raising the bar for providers, with future commissioning likely favouring organisations that demonstrate strong governance, financial strength and broad service capability.
Mergers and acquisitions are emerging as a key growth strategy, helping providers achieve scale, improve resilience and strengthen their competitive position in a changing market.
It has been a turbulent few years for the National Disability Insurance Scheme (NDIS).
The uncertainty following the release of the NDIS Review in December 2023 has coincided with a period of unrelenting pressure for providers, driven largely by workforce shortages, rising costs, growing demand for services, and more aggressive tax debt enforcement.
Combined, this has left many small- to mid-market providers wondering: Is it safe to continue?
NDIS providers: a look at the numbers
Providers have long argued that funding levels do not adequately cover the cost of delivering services. Then last month, the National Disability Insurance Agency (NDIA) cut budget allocations for ‘social, economic and community participation’ supports by 50% and ‘improved daily living skills’ supports by 10%.
It is perhaps unsurprising that we’ve seen rising insolvencies in the healthcare and social services sector. Data presented by the Australian Industry Group shows 94 insolvencies for the sector in the 2018-19 financial year compared to 464 in 2025-26. This is nearly a 400% increase.
94
insolvencies for the sector 2018-19
464
insolvencies for the sector 2025-26
~400%
increase
RSM’s own NDIS insolvency report took a deep dive into insolvency statistics in the sector and found several contributing factors. They included:
- higher costs
- heavier compliance
- unrealistic funding models
- flawed operations.
If a provider’s clients depend on NDIS funding to access services, and the provider cannot deliver them at the prescribed rates (or charge any out-of-pocket component), the math is simple. The business must find a way to stop the losses or it will not be viable long term.
Changing NDIS regulation
The Australian Government has been progressively tightening NDIS regulation for years in an attempt to improve the scheme’s sustainability.
26 recommendations came out of the NDIS Review which are being rolled out in phases. Many previously unregistered providers are now being brought into the regulatory framework, with supported independent living (SIL) and digital platform providers both becoming subject to mandatory registration from 1 July 2026. Expanded registration requirements will be rolled out from 1 July 2027.
Some of the reforms have prompted concerns the scheme is moving away from its original intent. For example, from 1 October 2027 the NDIA will establish a panel of plan management providers and only those providers will be able to deliver those services. The same commissioning model is currently in consultation for SIL providers.
Although the NDIA has announced timelines for commissioning certain service categories, the exact tendering and contract criteria for providers remains unconfirmed. That said, it is likely to favour organisations with:
- strong financial viability
- mature governance
- geographic coverage
- proven service delivery capability.
Providers in these categories have a short but distinct window to determine if they have the scale and capability to compete, or if a new strategy is required.
If you are a mid-market NDIS provider considering a merger or acquisition, you can ask RSM to assist with:
Partner identification and engagement
Due diligence
Merger strategy and structuring
Transaction support
Post-merger integration and transition
Stakeholder communication and change management.
Is it time for NDIS providers to go big or get out?
Mergers and acquisitions are a relatively fast way to achieve economies of scale, which is undoubtedly why we have seen such a flurry of M&A activity in the sector.
RSM’s board report, Mergers and acquisitions in the not-for-profit sector, shows consolidation is increasingly seen as a strategic response to:
- achieving scale
- improving financial stability
- reaching more people
- accessing new skills and capabilities
- reducing duplication and inefficiencies
- attracting high calibre executives.
A recent study by the Australian Institute of Company Directors found 5% of not-for-profits surveyed were currently undertaking a merger. 20% planned to discuss a merger in the next 12 months, and 7% indicated they were either winding up or planned to discuss winding up.
However, neither mergers nor acquisitions are as straight-forward as they may seem. The most successful mergers require solid timing, planning and execution. This generally means moving early to identify and engage with suitable partners, so both parties can be sure of alignment and negotiate terms from a position of strength rather than urgency.
Well-planned mergers also require strong due diligence from both sides, and a carefully devised strategy that seeks to bring the organisations together with the least possible friction, duplication, and inefficiency.
The end result of a successful merger, or repeatedly successful mergers and acquisitions, is a mid-market NDIS provider operating at a scale once reserved for the sector's largest players. Better margins are one benefit, but the real prize may be a much stronger position as the sector continues to evolve.
For NDIS providers struggling financially, our Restructuring and Recovery team can also assist with restructuring options, turnaround advice, and safe harbour guidance.
To organise a confidential chat, please contact the Restructuring and Recovery or Corporate Finance team at your local RSM office.
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