The concept of a merger is familiar in the for-profit sector: two corporations join together to become one corporation. The driver in this case is, as the name would suggest, profit. There is more to be gained for the corporations and their shareholders if the two officially join forces. But why might two non-profit organizations want to join forces so intimately—and is it even possible in Arizona?
Sometimes the leaders of two nonprofits come to the realization that their organizations are trying to make a similar kind of impact—or even the same impact—in the world, and see that together they could reduce a lot of redundant work and make a larger impact.
There are a few ways for them to accomplish this. Some arrange partnerships. Some draft management agreements, in which the organizations keep their independent identities but share resources and leadership. And still others—though fewer than one might suspect—choose to merge completely.
The reasons for the rarity of nonprofit mergers, according to one report by the Stanford Social Innovation Review, are three-fold. For one thing, given the absence of profit as a driver, the cost and effort needed to mix the brands (or re-branding as a new, merged organization) can appear prohibitive. For another, there would be the issue of combining the boards of the two organizations in an effective manner, since the work performed by a nonprofit is often born out of passion for the cause it is pursuing, and based in personal experiences and beliefs that spring from them. This can be a very powerful motivator to keep both organizations intact. This also affects the third element: identifying and filling roles for senior staff from both organizations. Redundancy is rampant in newly-merged organizations.
Yet in cases where the efficacy of a combined organization would go further in support of their stated cause, it could be the case that merging two organizations is really the best—and most responsible—option.
Chapter 34, Article 1 of the Arizona Revised Statutes, starting with section 10-1101, lays out the rules about how two nonprofits in Arizona can go about merging. Suffice it to say that they can.
And sometimes, they should.
Provident Law’s church and nonprofit attorneys can help nonprofit organizations in determining whether a merger would be the best course of action, and to facilitate the merger should they decide to go through with it. We stand ready to counsel and serve charities and foundations, as well as churches, private schools, colleges, universities and other types of nonprofit organizations—providing broad transactional and general counsel services in Arizona and surrounding areas. Contact us to learn more.