Armanino Blog

How to Harness the Power of a Strategic Alliance

by Grant Lam
October 14, 2015

Mergers and acquisitions (M&As) are traditionally thought of as business transactions in the for-profit world, but in the nonprofit industry, they’ve become an increasingly popular venture. Struggling nonprofits have looked to merge with or be acquired by other nonprofits as a way to improve finances, develop economies of scale and keep their mission alive. Healthy nonprofit organizations have turned to M&As as a means to strengthen their effectiveness, expand their reach and create better value in the community. Although still popular in the nonprofit community, M&As do come with some tricky and complex issues.

Increasingly, organizations are exploring more creative models of collaboration—such as joint ventures and partnerships, whether formal or informal. Well-planned and properly executed, these strategic alliances can help accomplish a variety of organizational goals, including:

  • Increase funding
  • Expand community impact
  • Reach new areas and populations
  • Improve operational efficiencies

The real-life examples that follow showcase some successful models of collaboration among nonprofits across the country.

Example 1: Formal Collaboration
After realizing that they were competing for the same patients and the same funding, two San Francisco Bay Area nonprofits agreed to join forces in providing cancer education and support services. In lieu of an outright merger, they formed the Latino Cancer Collaborative through a memorandum of understanding. The collaboration allowed for some degree of independence so that both organizations could maintain their individual reputations in the community and expand their non-overlapping programs. As a result, the collaborative has been able to reach more Latinos while eliminating duplicate services. Because they are no longer competing for the same pool of grant funds, both agencies have been able to expand their services in their respective areas of expertise.

Example 2: Shared Development Director
A tenant organization and a homeless coalition in northeast Ohio jointly hired a development director after each had attempted to hire private fundraising consultants on their own (money was an issue). The shared development director now assists both organizations in raising funds to not only sustain their operations but also build capacity. The shared development position has also enabled program staff to focus more time on their organization's core mission and advocacy efforts.

You Don’t Have to Go It Alone
Strategic alliances can certainly be an effective tool for nonprofits. With needs outpacing funding in so many areas, it’s getting harder and harder to go it alone.

Yet, many nonprofits wait until it’s too late. The time to seek out opportunities and explore options is before funding challenges, leadership changes or competitive pressures have taken their toll. Waiting too long, organizations are forced to make tough decisions under pressure. The best time to consider restructuring is when you can come at it from a position of strength, when the organization is still viable and capable of change.

Proper structuring and thorough due diligence are at the heart of a successful nonprofit collaboration.

October 14, 2015

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Grant Lam - Partner, Audit - San Francisco CA
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