Partnering in the Australian Not-for-Profit Sector: Mergers and Beyond.

Joseph Connellan, an experienced Australian Not-for-Profit CEO and Non-Executive Director, unpacks some of the "Why" and "How" Not-for-Profits get together, including through mergers.  

www.josephconnellan.com

Transcript

Partnering in the Not-for-Profit Sector

Joseph Connellan

Hi, I want to talk about why and how not-for-profits sometimes decide to partner up or merge — and how they actually go about doing it.

This isn’t legal or financial advice. It’s practical guidance, based on real experience and a guide called Better Together I wrote almost a decade ago. It’s aimed squarely at boards and senior leaders who are trying to work out whether staying solo still makes sense.

Why Organisations Come Together

Most not-for-profits don’t wake up one day excited about merging.

Usually, something pushes them there.

It might be growing demand, tighter regulation, funding changes, or rising costs. Sometimes it’s a trigger event — the CEO leaves, the Chair steps down, a project fails, or a funder changes the rules.

In simple terms, organisations come together because:

They need scale to survive

They want to deliver better services

They want stronger governance

Or they want to stop running just to stand still

As one CEO put it: “We don’t chase mergers, but we always talk about them — so we’re ready when one appears.”

Big Organisations vs Small Ones

Big and small organisations often come to the table for very different reasons.

Smaller organisations are usually looking for stability. Things like:

Help with governance

Better cash flow

Meeting regulatory standards

Or just staying viable

Larger organisations tend to be thinking about growth. They might want:

A wider geographic reach

New services

More assets

Or stronger political and funding influence

Both sides can benefit — but only if everyone is honest about what they want.

Not Everything Is a Merger

Here’s an important point: not all partnerships are mergers.

There’s a whole spectrum.

At one end, you’ve got simple partnerships — running a conference together, outsourcing a service, or sharing back-office systems.

At the other end, you’ve got full mergers — where assets, staff, services, and governance all come under one roof.

The closer you get to that end, the less autonomy you keep — and the more careful you need to be.

And yes, the best partnerships are usually backed by clear contracts, not just goodwill.

If You’re Going to Merge, This Is How It Happens

Mergers are board-level decisions. Full stop.

They usually unfold in four stages:

First: Why are we doing this? What problem are we actually trying to solve?

Second: Who might be the right partner — and why?

Third: Do we really mean it? This is where due diligence, consultation, and tough conversations happen.

Finally: Making it work — implementation, monitoring, and cleaning up all the loose ends.

And here’s the hard truth: If the board isn’t genuinely committed, the whole thing can collapse late — and painfully.

Due Diligence: Lifting the Kimono

Due diligence isn’t just about the numbers.

It’s about testing assumptions — including the ones no one’s saying out loud.

You look at:

Finances

Legal issues

Staff arrangements

Properties

Systems

Risks

And you do it properly, with time, leadership, and sometimes outside experts.

As a regulator once said: “Due diligence is about checking whether the story you told yourself is actually true.”

Culture Matters More Than You Think

Culture is the hardest thing to define — and the easiest thing to get wrong.

This is about:

Mission and values

How boards behave

How management leads

How staff and service users are treated

How the organisation works with government

You can’t outsource culture. Boards and senior leaders have to engage with it directly.

One Chair described handing over a service like “adopting out a child” — that’s how emotional this stuff can be.

Operations, Finance, and Legal Stuff (Briefly)

Operationally, you need to understand:

Services

Demand

Systems

Staff structures

Development pipelines

Financially, you’re looking at:

Cash flow

Debt

Long-term viability

Asset values

Risk exposure

Legally, it’s about constitutions, contracts, regulation, property, and liabilities — mostly standard work, but absolutely essential.

Regulators and Funders Are Part of the Journey

Regulators don’t usually push mergers — but they care deeply about governance, performance, and risk.

They expect early notice, clear reasoning, proper documentation, and transparency.

And even if a funder can’t approve your merger, they can approve — or block — the transfers that make it work.

So yes, you talk to them early.

Final Thought

Mergers and partnerships aren’t about day one.

They’re about the 12 to 18 months after, when the real work begins.

If done well, they can strengthen services, improve resilience, and create better outcomes for clients.

If done badly, they drain energy, damage trust, and leave organisations weaker than before.

So take your time. Be honest. And make sure everyone at the top is truly on board.