Time’s Right for NFPs to Think About Merging - Debate

Foundation for Young Australians CEO Jan Owen.

World Vision Australia CEO Tim Costello.

The time is right for healthy Not for Profits to think about mergers and acquisitions, not just Not for Profits “dying in a ditch”, said Foundation for Young Australians Chief Executive Officer Jan Owen at a social sector breakfast debate in Melbourne.

The breakfast debate on the topic of “The non-profit sector in Australia needs to be rationalised” was hosted by The Macquarie Group Foundation and Social Ventures Australia.

Owen was mounting her argument in the affirmative, and taking the negative was World Vision Australia CEO and Community Council for Australia Chair Tim Costello.

The debate was based on a piece written by SVA Quarterly Executive Director Duncan Peppercorn in the SVA Consulting Quarterly called Getting Our Act Together. The article covered the potential of merging and integrating NFP organisations.

“Merger and acquisition advocates suggest that consolidation in the non-profit sector would reduce overheads and the pressures on fund raising. But the greatest benefit is likely to be in better services, rather than cost savings,” Peppercorn said.

“This can frequently be achieved through collaboration rather than integration and merger.”

At the breakfast debate Owen emphasised the difficulty of merging however she said consolidation of resources of similar organisations was an important way for the Not for Profit sector to move forward.

“In 2010 Productivity Commission estimated that were roughly 600,000 Not for Profits in Australia, the sector is constantly changing and growing while 70 per cent of charities have been active for around 10 years, around 1700 charities apply for registration each year,” she said.

“One Not for Profit for every 40 people in Australia.”

She said merges and acquisitions might be necessary as the Not for Profit sector was “highly fragmented”, with one example being the 75 breast cancer organisations in Australia.

“There is something like 75 breast cancer organisations in Australia, one topic one issue, one set of the population, all raising funds, all campaigning and all trying to spend money on research,” she said.

“The time is right for healthy organisations to think about mergers and acquisitions, not organisations dying in a ditch, and think about it proactively.”

She used her own example of a collaborative relationship between FYA and Beacon Foundation, a Not for Profit for secondary school students.

“We work with about 2500 young people each and have the same outcome in mind,” she said.

“It was only natural that we could get out of our own way and sit at the table and talk about what we could do better and faster for young people in a context of increasing unemployment, lack of employability and job readiness skills that affects young people in the country.

“It has been, and is, a courtship, we trust, like and believe in each other. We’re not merging… the point is we’re on a journey thinking about impact and on a journey thinking about scale and reach. We’re on a journey of thinking about that if we let our own programs go and re-design, co-design with our end user, with our beneficiary and with our resources that we have, what is it we can recreate.

“And we’ve gone through a fantastic process with the help of SVA, of clearing the decks, getting out of our own way, putting egos aside and redesigning what we’re doing for the future.”

On the negative, Costello said there was already great collaboration in the sector and that the diversity that exists could strengthen innovation and flexibility. He also warned that consolidation could have significant costs as well as benefits.

“Would it be wise to pursue large scale, systematic consolidation of the sector as an end to itself,” he asked.

“Most of the organisations we have small and large alike already exist for good reason. They are incredibly diverse and most of them are distinctive, working in discreet specialist fields, with specialised expertise, with particular networks and stakeholder relationships.

“It’s hard to recreate through a merger. They represent diversity of approach and diversity and often founded with deliberate intent.”

To learn more on SVA Consulting Quarterly, click here.