More than 70% of not-for-profit leaders expect to pursue mergers and acquisitions (M&A) in the next three years, up from just 15% in 2022, according to Pitcher Partners recent research.
Yet readiness lags. The recent HLB Mann Judd’s Not For Profit Leader’s Report found that 60% of not-for-profits prioritise collaboration, but only 16% include M&A in their strategic plan.
For-purpose organisations ultimately exist to deliver on their mission and maximise impact in the communities and ecosystems in which they choose to operate. In practice, however, many boards and management teams can tend to prioritise preserving the organisation over advancing their broader mission.
As Paul Ronalds, founder and CEO of Save the Children Global Ventures, puts it:
“In the for-purpose sector, a merger is too often seen as a failure rather than as an opportunity to broaden reach, deepen expertise or increase policy influence with government.”
Reframing mindsets on M&A
As for-purpose M&A activity rises, how are you positioning your organisation to make timely, well-grounded decisions around whether to pursue a merger, acquisition or not?
Some directors in the for-purpose sector have the mindset that they will only consider a merger as a last resort, but Ronalds urges:
“Subject to your director duties, the merits of a decision should be determined by whether or not it advances the organisation’s mission, not the organisation.”
Put frankly, there can be a degree of resistance from some executive and boards to place the organisation’s mission above the organisation itself. This understandable human trait and ‘elephant in the room’ can often turn to preserving people’s own roles, identities and existing structures.
This contrasts with the private sector, where although there are of course differences between these domains, becoming part of a larger organisation is celebrated and is often the end game for early-stage operators, providing a solution to scale innovation and outcomes that wouldn’t otherwise be possible.
Being open to having the M&A conversation – with mission and impact front and centre is key. This positions for-purpose organisations to recognise and act on compelling opportunities, something that in the current environment can be the difference between adapting and growing or drifting towards unsustainability.
What’s driving M&A?
The past 12 months has sharpened the urgency for Australia’s for-purpose sector to rethink how it operates, funds its mission, and sustains its workforce.
The recent Koda Capital Matters that Matter insights report outlines “a sector under immense strain – grappling with rising service delivery costs, regulatory and political uncertainty, and a growing demand for services that far outpaces available resources.”
Yet the report adds: “within these challenges lies opportunity: to better articulate the true cost of impact, to advocate collectively for systemic change, and to strengthen the operational and financial foundations of organisations that play a vital role in society.”
Some of the headline dynamics driving M&A activity:
- Flatlining government revenue and forecast government budget uncertainty.
- Rising corporate overheads across for-purpose providers.
- Demand for impact at scale – the growing need to expand impact, measurement and evidence of outcomes.
- Government preference for consolidation – for economies of scale, quality control, and return on investment.
- Blurring of traditional industry lines – adjacencies across broader healthcare, primary care, mental health, disability and aged care sectors.
- Specialist talent shortages making it harder for smaller NFPs to secure skilled staff.
- The rise of digital services potentially reducing the relevance of traditional geographic boundaries.
- Policy and regulatory reform across federal and state governments.
Building Your M&A Strategy
Successful M&A requires more than openness to opportunity – it demands deliberate preparation and alignment.
Here are some practical ways to build M&A readiness:
- Define the strategic logic
Be explicit on how M&A advances your organisation-wide strategy and overall mission. Get unified board-executive alignment through what should be tough and thought-provoking conversations. Without clear strategic coherence around how M&A drives the broader organisation strategic plan, M&A can result in siloed activity.
- Set clear criteria
Develop concise, practical, and governance-led ‘must-haves’ and ‘no-go zones’ that guide both executive and board decisions. This prevents mission drift and maintains focus when attractive but misaligned opportunities arise. Clear criteria are essential as a decision lens for focus and discipline.
- Explore impact opportunities
Impact needs to be front and centre when considering what broader social outcomes could be achieved by combining different organisations. Impact measurement is no longer optional. Consider opportunities where joining organisations with high impact and measurement maturity could deliver greater outcomes through a targeted yet ‘systems-wide’ approach.
- Know your position
Benchmark your size, reputation, breadth of service and financial strength against a defined peer set. Many organisations overstate their attractiveness, so seek an independent view to counter optimism bias and uncover less apparent differentiators and upsides.
- Test different scenarios
Compare different scenarios that could unfold – a merger of equals, integration into a larger entity, group models and targeted acquisitions. Each scenario demands different analysis, strategic thinking and outcome expectations.
- Start conversations early
M&A strategic logic and criteria need to be tested in live market conditions (market scan) with potential partner organisations to gauge appetite for exploratory conversations. Early-stage relationship building typically opens up unique insights while sending a signal of sector leadership and proactiveness.
Prepare proactively or react defensively
The accelerating pace of M&A activity isn’t a temporary phenomenon – it reflects structural changes in how the sector operates and delivers value. Organisations face a choice: prepare proactively or react defensively.
Being ‘ready’ means choosing if, when, and how to consolidate – on terms that enable outcomes-based services and scaling impact.
Organisations that prepare now, with mission as their north star, will be best positioned to seize aligned opportunities and amplify their impact when it matters most.
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Get in touch if you’d like to discuss merger and acquisition (M&A) strategy and how you can lead through industry consolidation.
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