The number of nonprofits in the United States has increased by 34% in the last 20 years.[1] In that same period, the percentage of U.S. households giving to charity fell from roughly 66% to less than half. More nonprofits, fewer donors to support them. That’s trouble.

We have a sector that isn’t sustainable, and the growing number of new nonprofits is a major contributor to the Generosity Crisis we’re facing. Better fundraising alone won’t solve this. Instead, let’s look at how the for-profit world solves its own growing pains: consolidation.

More nonprofits mean more duplication of effort. Resources that could be concentrated into fewer, stronger institutions are instead spread thinner every year, often across overlapping missions. There’s already a finite bench of board talent, and staff turnover rates are skyrocketing.

In the for-profit world, companies acquire and merge because scale works: it consolidates talent, eliminates duplicated back-office costs, extends reach to consumers, and gives the strongest management teams more resources to work with.

So why is it that only about 1% of nonprofits merge in a typical year,[2] even when most nonprofit leaders say collaboration could help them fulfill their mission better?

The hesitancy to consolidate is part cultural and part economic

Nonprofit founders sit at the center of the problem. For many founders, their organization is their identity, so keeping it independent feels like protecting the mission itself. These visionary leaders sincerely believe they’re the only ones who can tackle the problem they care about.

Financially, there’s no incentive to merge or acquire, because nonprofits have no equity. There are no shareholders demanding a return and no market punishing an organization for staying small and inefficient. A struggling nonprofit can limp along for years on a shrinking donor base and a devoted founder’s sheer will in a way a for-profit simply cannot.

The consequence of unchecked proliferation

Proliferation and inefficiency hurt individual nonprofits first. But the damage doesn’t stop there. It compounds across the whole sector by tolerating inefficiencies, diluting donor support, and eroding trust.

Consider the new beagle rescue that gets its 501(c)(3) status because its founder loves the breed. The passion to save these dogs is well-intentioned, but the same town already has an organization for senior beagles, another for hounds, and a third fighting beagle puppy mills. The new rescue poaches its development director from the hound organization and its adoption director from the senior beagle group. Donors get confused by the proliferation of rescues and stop giving altogether. Families looking for their next pet get overwhelmed by the choices.

Multiply this scenario by the 113,312 new nonprofits approved in 2024 alone,[3] and you get a sector duplicating administrative overhead at an alarming rate while the best executives grow disillusioned by competition in an already shallow talent pool. Donors are left wondering if their gift will even matter in an increasingly noisy, fragmented landscape.

How M&A can work in the nonprofit world

Mergers in the nonprofit sector deserve the same positive attention they get in the corporate world. Done well, M&A becomes a donor engagement strategy. When two organizations with overlapping missions combine, the resulting entity can tell a more powerful story: more capacity, less redundant overhead, greater impact, and a better chance that a donor’s investment is actually solving the problem. Money once spent on duplicated finance, HR, marketing, and fundraising functions can go to program delivery instead. That improves the program-to-overhead ratio that savvy donors already track.

Obviously, not every nonprofit should merge, and scale isn’t automatically the answer. But the sector’s default assumption that building something new is always better than combining forces deserves real scrutiny.

The organizations best positioned to earn back donor trust and prove that generosity still works are the ones with the scale, focus, and operational discipline to show real results. Mergers and acquisitions are how the for-profit world builds efficient and effective companies. It’s time the nonprofit sector caught up.

Start the Conversation

Nonprofit leaders, board members, staff, and funders can advance the M&A conversation in practical ways:

• In strategic planning, ask the same question for-profit boards ask: do we keep building on our own, or is there an organization we could partner with or acquire?
• Encourage boards to ask, at least once a year, whether their mission would be better served by combining with a peer organization instead of competing with one.
• Educate would-be founders on the real costs of starting a new 501(c)(3) and point them first toward organizations already doing the work.
• Encourage funders to earmark dollars specifically for merger exploration.
• Publicize successful nonprofit mergers the way corporate M&A is covered and reframe consolidation as strength, not failure.

About the Author:

Jessica Browning, principal and executive vice president of the Winkler Group, has more than 30 years of nonprofit experience. Her specialty is donor communications and fundraising strategy. She holds a B.A. from Duke University and an M.A. and M.B.A. from the College of William and Mary.

[1] IRS Data Book.

[2] “Nonprofit mergers aren’t a last resort—but a strategic first choice,” Candid.

[3] IRS Data Book.