Virginia Nonprofit Merger May Signal Consolidation Trend

As the recession drags on, the recent merger of three southern Virginia nonprofit organizations may signal a consolidation trend among nonprofits in the region, the Richmond Times-Dispatch reports.

The Southside Virginia Nonprofit Resource Center, Focus INC, and ConnectSouthside.org — all of which provided training and resources to the region's nonprofits — have begun to operate as one group under the governance of the Appomattox Regional Library System. Executed in February, the merger has allowed the organizations to consolidate resources, seek larger grants, and share office space at the library while continuing to pursue their common mission, said Wendy Austin, former director of ConnectSouthside.org and current director of the still-nameless group.

Nancy Stutts, director of Connect Network, which works with other nonprofits, said she expects the economic downturn to spur more mergers among local nonprofits. Those in the works include a possible deal between CHIP of Virginia and Healthy Families, both of which offer child and family support programs, and between Caritas Shelter and the Healing Place, which both provide shelter to the homeless. Other organizations, including the Learning Disabilities Council, have opted to seek out groups or individuals to "adopt" them.

Although a merger can be a long, complicated, and emotional process for a nonprofit resulting in the loss of leadership from one or both of the original groups, in the long run they can result in financial stability and save organizations from having to close outright. Indeed, mergers are becoming an increasingly attractive option for many nonprofits that are struggling with reduced staffing and resources as a result of the economic crisis. According to a recent Bridgespan Group report, 20 percent of responding nonprofits said mergers could be a solution to their financial difficulties.

"If economic conditions continue to deteriorate, more and more nonprofit leaders will likely consider the [merger and acquisition] option," said William Foster, co-author of the report. "But our study shows that there has never been a lack of nonprofits considering M&A when under financial distress."

Luz Lazo. "Nonprofits Find Reasons to Merge in Economic Slump." Richmond Times-Dispatch 04/23/2009.