Mergers are financial and operational agreements between organizations that unite them to form a single entity. Businesses and nonprofit organizations of all sizes may use mergers, including mergers with the other type of organization to create a new for-profit business. While nonprofit and for-profit mergers have much in common, in some cases they occur for different reasons.

Business Mergers

When two for-profit businesses merge, it is generally to strengthen their combined market position and gain an advantage over competitors. When one company is significantly larger than another and buys it out, the process is known as an acquisition. A merger is more of a meeting of equals, with both businesses benefitting from the arrangement. The new business may keep the name of one of the former businesses, or take on a new name.

Nonprofit Merger Purpose

When nonprofit organizations merge, they combine their assets and resources in a similar way to what happens in a business merger. However, rather than competing for business and seeking profits, the new nonprofit organization that is formed works to advance its cause by serving the public good. Just as in business mergers, nonprofit mergers typically bring together organizations that perform similar tasks or services. The large number of nonprofit organizations makes merging a useful way for small groups to grow, rather than wasting resources competing with one another.

Outcome

In both types of mergers one of the first orders of business is to set up a unified leadership and streamline operations throughout the new organization to provide consistency. A business formed after a merger produces business plans to make use of its new assets and leverage its stronger market position. Likewise, a nonprofit organization that results from a merger will attempt to seek fundraising, government grants and community awareness using its new, larger position of prominence and greater financial resources.

Considerations

If you own a business or run a nonprofit organization, the decision to agree to a merger shouldn't be taken lightly. Once two or more organizations come together, separating them may be impossible or complicated and expensive. Regardless of the type of merger, agreeing on new policies, long-term objectives and leaders for the new organization may pose as much of a challenge as deciding how to share resources.