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Mergers and acquisitions in the not-for-profit sector
Will a merger save your not-for-profit or destroy everything you’ve built?
A merger can be an exceptional tool for non-profit organisations seeking to strengthen capability and extend their impact.
For some, it may even be the only way to survive current financial pressures.
However, handled poorly, a merger could threaten your mission, your culture and the very identity of your organisation. Without the right governance, due diligence and transition planning, they can also expose boards to significant financial, legal and reputational risk.
If your not-for-profit is considering a merger or acquisition, you need to understand the risks and opportunities involved.
This report is a grounded, evidence-based guide to NFP mergers in Australia. It provides the clarity boards need to make informed, defensible decisions.
What you’ll find in this report
An overview of why mergers are increasing across the NFP sector and what is driving board-level decision making.
Guidance on financial, legal and governance considerations before entering merger discussions.
The unique factors in mergers involving Aboriginal organisations and NFP acquisitions of for-profit entities.
What boards should know about using mergers to stabilise an organisation under pressure.
Expert perspectives from financial, insolvency, business advisory and legal specialists, supported by real-world case studies.
Why boards are exploring mergers earlier
Boards across the NFP sector are evaluating merger opportunities earlier, rather than waiting for financial or operational pressures to force action. This highlights a growing understanding that timing plays a critical role in whether a merger strengthens mission delivery or simply stabilises a struggling organisation.
Approaching a merger proactively allows boards to:
- Select the right partner based on strategic alignment, rather than urgency.
- Negotiate the structure and terms of the merger from a position of strength.
- Manage service integration, capability uplift and systems change over time.
- Give staff, clients, funders and communities time to adapt, plan and transition.
Taken together, acting early to explore a potential merger can be an effective strategy to strengthen impact and resilience, rather than being used as a last-minute fix.
The report sets out what proactive merger exploration looks like in practice, including how to structure early conversations with your board before approaching potential partners.
Want to continue reading?
If you want to approach a merger strategically rather than reactively, this report is a valuable starting point.
The importance of due diligence
There is a common misconception that, because NFPs are driven by purpose over profit, cash is limited and financial risk or fraud is less of a concern. This is simply not the case.
Financial risks are present in all organisations, and may even have a greater effect on an NFP due to the regulatory oversight involved.
When undertaking due diligence prior to a not-for-profit merger or acquisition, prevention is preferable to remediation. The process should extend beyond a checklist approach and apply professional scepticism – maintaining an enquiring mind and remaining alert to potential red flags.
Learn more about effective transition governance in the full report >>
Justin Audcent
"While financial distress continues to drive a large proportion of mergers, we are increasingly seeing NFP boards proactively pursue mergers and acquisitions as a strategy to achieve greater scale and ensure the long term sustainability and success of their organisation. Boards of smaller NFPs which fail to consider a merger will be at significantly greater risk of becoming unviable."
Kirsty McGovern-Hooley
"Even when warning signs are showing, there’s usually room to act. Many NFPs hold cash and assets that could be better used, but inefficiencies and outdated structures are limiting what they can achieve. Boards that focus on their purpose and mission, seek advice, ask the right questions, and make the right changes can fix these inefficiencies and redirect resources to where they matter most."
Exploring M&A due diligence in an NFP context
There is a common misconception that NFPs carry lower financial or fraud risk because they're purpose-driven.
This report uses real-world case studies to demonstrate why that assumption is dangerous.
From a board perspective, robust due diligence is essential to:
- Safeguard mission integrity.
- Understand financial sustainability and funding risk.
- Identify governance, compliance and reputational issues early.
- Avoid inheriting hidden liabilities that can undermine the merged organisation.
The report outlines how boards should oversee due diligence, what “professional scepticism” looks like in practice, and where specialist support adds the most value.
Andrew Connelly
"Due diligence should not be treated as a perfunctory or cost-minimisation exercise... A thorough process is often the most effective safeguard against inadvertently assuming financial, legal or operational risk”
Jerome Mohen
"Despite the increasing number of NFP insolvencies in recent years, there have been many success stories involving distressed organisations operating under Safe Harbour until a merger or acquisition is complete.”
Understand insolvency risks and safe harbour protections in NFP mergers
Insolvency issues are a particular concern when an organisation is pursuing a merger. If the organisation is in financial distress and continues to trade while insolvent during the process, it can expose the board to personal liability and create risks for both organisations.
The best safeguard against this risk is Safe Harbour: a protection mechanism against insolvent trading. If implemented correctly, it gives board members time and space to explore restructuring options and pursue a merger, rather than closing the organisation immediately.
How RSM can help
RSM’s multifaceted team supports not-for-profits through mergers and acquisitions across:
- Business advisory and strategy
- Corporate finance
- General accounting services
- Fraud, forensic accounting and due diligence
- Change management and integration support
- Legal and regulatory coordination
- Outsourced CFO services
- Safe Harbour guidance
- Insolvency, restructuring and turnaround services
We are also supported by a vast network of complementary specialists, including law firms with proven experience executing mergers and acquisitions.
If your organisation is contemplating a merger or acquisition, we are ready to help. Simply reach out to the team at your local RSM office.
