The rise of NFP mergers
Not-for-profit (NFP) organisations are increasingly viewing mergers as a strategic response to the sector’s evolving sustainability challenges. Persistent reductions in government and philanthropic funding, founder fatigue, heightened competition for grants and the growing need for scale and long-term sustainability are prompting more NFPs to actively explore alliances and collaboration and formal mergers by acquisition or change of control. Mergers are increasingly viewed as a proactive strategy to strengthen organisational sustainability, scale impact, increase operational efficiency and ultimately deliver better outcomes for beneficiaries.
Australia’s NFP sector itself is large with around 60,000 organisations collectively generating approximately AU$226 billion in annual revenue and employing approximately 1.4 million people, but remains highly fragmented. This scale and fragmentation further incentivises consolidation as a pathway to achieve critical mass and long-term sustainability.
Recent sector reports and events, such as the Social Enterprise Jobs Summit, highlight a growing openness to mergers and collaborations across the Australian NFP landscape. These developments reflect a broader recognition that, by joining forces, organisations can pool resources, share expertise and leverage collective strengths to address complex social challenges more effectively.
What’s driving the NFP merger trend?
Several key factors are driving the increased interest in mergers across the Australian NFP sector, including:
- Funding pressures: NFPs are facing increasing financial uncertainty, with geopolitical instability and shifting government priorities disrupting grants, philanthropic support, fundraising revenues and business models generally. This trend is particularly pronounced among organisations reliant on short-term project funding or those facing declining donor engagement. In fields such as aged care and disability support, rising costs and capped government funding have left many providers financially vulnerable, pushing them towards mergers simply to remain viable. Many boards are proactively considering alliances and mergers to find back office support and other synergies, secure long-term financial sustainability, diversify income streams and unlock new funding opportunities that may only be available to larger or more resilient organisations, such as multi-year government contracts or major philanthropic grants that require demonstrated scale, governance capacity and financial stability.
- Changing sector landscape: The NFP sector is experiencing significant structural change. Cost of living pressures and over-the-horizon deficits are constraining personal and public finances. Governments and major funders are increasingly awarding larger, outcome-based contracts, often favouring organisations with greater scale, capacity and demonstrated impact. At the same time, regulatory requirements extend and are becoming more complex, and there is a growing expectation for transparency and accountability. These factors are encouraging NFPs to combine resources, expertise and infrastructure to remain competitive and relevant.
- Mission alignment: Mergers can provide a pathway for NFPs to expand their reach, strengthen their advocacy and deliver improved outcomes for their communities. By joining forces, organisations can pool their knowledge, networks and capabilities, enabling them to address complex social challenges more effectively and amplify their collective impact. Mergers can also help ensure the continuity of vital programs and services that might otherwise be at risk due to resource constraints.
- Regulatory and governance demands: There is a growing emphasis on strong governance, risk management and compliance across the NFP sector. Meeting these expectations can be challenging for smaller organisations with limited resources. Merging can provide access to a broader skills base, more robust governance frameworks and the capacity to meet increasing regulatory and reporting obligations. Larger, merged entities are often better positioned to attract and retain high-quality board members and executive talent, and to meet the increasing expectations of regulators, funders and the communities they serve. Importantly, from 2026 Australia’s new merger control regime will also apply to NFPs, meaning that particularly large charity mergers may require prior ACCC notification and approval.
- Other considerations: Succession planning, "founder fatigue", reputational considerations and the desire to future-proof the organisation against sector volatility are also prompting boards to explore merger opportunities.
Merger options
There are several structuring options available for NFP mergers in Australia, each with distinct legal, operational and governance implications, including:
- Asset / business transfer - This involves one organisation (Organisation A) transferring all (or selected) assets, liabilities, contracts, staff and programs to another organisation (Organisation B). The transfer is typically achieved through an Asset or Business Sale Agreement, supported by ancillary documentation to address employment, property and contractual matters. Following the transfer, Organisation A is usually wound up (which is a process in itself), and its activities continue under Organisation B. As part of the integration, Organisation B’s governance structure may be reconfigured to provide for representation from Organisation A, such as appointing former board members or members to Organisation B’s board or membership. This is the most common merger structure for NFPs structured as companies limited by guarantee.
- Change of control acquisition - This model involves one organisation (Organisation A) becoming the sole member of another organisation (Organisation B). Organisation A gains control over Organisation B (including control at board level), which continues to exist as a separate legal entity but is governed by Organisation A as the parent. This structure can provide continuity for Organisation B’s operations and branding, while enabling strategic alignment and oversight by Organisation A.
- New entity- Under this model, the merging organisations may choose to establish a new entity and each transfer assets and programs into it, with the legacy entities typically wound up. This model allows for neutral governance arrangements and avoids the perception of one organisation 'taking over' the other. However, it is less common due to the complexity of setting up a new entity, transferring registrations and contracts and the loss of continuity for the original organisations.
- Amalgamation - Certain legal structures, such as state and territory based incorporated associations and Aboriginal and Torres Strait Islander corporations registered under the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth), can amalgamate under specific statutory processes. This enables two or more organisations to combine into a single new entity, with all assets, liabilities, rights and obligations automatically vested in the amalgamated (or successor) organisation. Members of the original organisations become members of the new entity. Statutory amalgamation can streamline the process and provides for the establishment of a new entity that recognises the assets and liabilities of the amalgamating entities, but is only available to organisations with eligible legal structures.
Key considerations for NFP mergers
A successful NFP merger requires careful planning and consideration of a range of strategic, legal and operational factors, including:
- Clarifying strategy: The board and executive leadership of each organisation must be united on the underlying reasons for pursuing a merger and the intended outcomes. This involves open, honest discussions about organisational goals, challenges and the potential benefits and risks of merging.
- Partner selection: Developing clear, board-approved criteria for identifying and assessing potential merger partners is crucial. Considerations should include alignment of mission and values, financial health and sustainability, leadership capability, organisational culture, stakeholder relationships and expectations around timing and process. It is also important to assess the strategic fit and the potential for synergies between the organisations, as well as any cultural or operational differences that may need to be addressed.
- Merger structure: Consider and determine the most appropriate merger structure for the organisations involved. The chosen structure should reflect the organisations’ legal status, governance preferences, operational needs and stakeholder interests. Early legal and strategic advice is essential to identify the most suitable approach and to manage risks throughout the merger process.
- Negotiation and due diligence: Engage in transparent, good-faith negotiations, supported by independent legal, financial and tax advice. Comprehensive due diligence is essential to identify and address potential risks, liabilities and integration challenges.
- Implementation planning: Develop a detailed implementation plan that sets out a clear timeline, key milestones and responsibilities. Effective communication with staff, funders, clients and other stakeholders is vital throughout the process to maintain trust and engagement. The plan should address the integration of systems, processes, culture, governance and branding, as well as risk management and change management strategies to support a smooth transition.
Case study: Youth Enterprises Australia and White Box Enterprises
In 2024, Youth Enterprises Australia (YEA), a Melbourne-based social enterprise, faced the challenge of transforming its business model. After a period of time, it decided that it would put itself up for auction to other social enterprises that could integrate the youth training programs into their business. With support from Think Impact, YEA's board elected to merge with social enterprise incubator White Box Enterprises (WBE).
The merger process was structured as an acquisition, with WBE becoming the sole member of YEA and taking full control of its operations, assets and liabilities and its board. This approach provided a clear and efficient pathway for integrating YEA’s programs and resources into WBE’s broader Work Integration Social Enterprise portfolio.
A key outcome of the merger was the expansion of WBE's subsidiaries into new markets, which leveraged YEA’s assets and expertise to create meaningful employment opportunities for young people, particularly in the infrastructure services sector. The merger ensured that YEA’s legacy and mission would continue, while also enabling greater scale and sustainability through WBE’s established networks and operational capacity.
Throughout the process, MinterEllison provided comprehensive legal support, advising on structuring, due diligence, regulatory compliance and the transfer of assets and liabilities. This case demonstrates how a well-planned and executed merger can deliver lasting benefits for beneficiaries, staff, and the broader community, and highlights the importance of strategic alignment, robust due diligence and effective implementation.
How we can assist
MinterEllison has extensive experience supporting NFP organisations through every stage of the merger process. Our multidisciplinary team provides tailored, end-to-end legal and strategic support to help NFPs achieve successful, mission-driven mergers and collaborations. Our services include:
- Strategic advice and options appraisal: We work with boards and executive teams to clarify merger objectives and assess strategic options.
- Legal structuring and due diligence: Our team can advise on the most appropriate legal structure for the merger and conduct comprehensive due diligence to identify risks and opportunities.
- Negotiation and documentation: We support clients through negotiations with merger partners, draft and review all necessary legal documentation (including merger agreements, asset transfer agreements, and governance documents) and help secure stakeholder approvals.
- Implementation planning and integration support: We assist with the practical aspects of merger implementation, including integration of governance frameworks, systems, staff and operations, as well as ongoing compliance and risk management.
Beyond mergers, MinterEllison provides holistic legal support across the social impact sector. Our expertise spans structuring and start-up advice, charity registration, governance, financing, contracting, compliance, risk management, strategic alliances, joint ventures, and the winding up of entities. Our team has a deep understanding of the unique challenges and opportunities facing the NFP sector, and we are committed to helping organisations navigate complexity, manage risk and maximise their positive impact in the community.
