More nonprofits engage in mergers for survival

Some would say they were meant to marry. Last summer, they finally did.

"It was probably the most obvious merger in history," said Matt LiPuma, executive director of the Family Nurturing Center, which now encompasses Dorchester CARES, which stands for Collaboration, Advocacy, Resource Development, Education, and Support. He said the alliance has put the agencies in a better position to weather expected cuts in funding by broadening their reach among donors and amplifying their community presence.

Those involved in the nonprofit sector say such deals have increased in the last decade, but are accelerating now as organizations face a drop in donations and cuts in funding due to the recession. While many groups are still operating with funds from last year, they anticipate feeling the full brunt of the economic downturn over the next six to 18 months.

The Boston Foundation - a large philanthropic organization - has been urging groups to consider partnerships as a way to withstand the downturn. Some officials say there are too many independent groups operating in Massachusetts to survive.

In addition to the Family Nurturing Center merger with Dorchester CARES in July, the Arts and Business Council of Greater Boston merged with the group Volunteer Lawyers for the Arts in August; and earlier this month, Centro Lat ino de Chelsea merged with Concilio Hispano in Cambridge to become Centro Latino Inc.

Centro Latino came about because the Chelsea group wanted to grow, but held off due to funding cutbacks totaling about $100,000, according to chief executive Juan Vega.

"A combination of these two agencies made sense," Vega said. Unless there are other funding cuts, he added, both groups' staff and programs will remain intact.

Consultants who work with nonprofits to form partnerships said more groups are seeking assistance.

"We are seeing an extraordinary amount of interest [in possible mergers] over the last four to five months," said Robert Harrington, director of the strategic restructuring practice at La Piana Consulting, a California company that specializes in coordinating nonprofit partnerships. "The most recent increase is [because of] the economic climate, in terms of real concern over the lack of, or, I should say, the declining support for nonprofits from foundations, individual donors."

But it wasn't so long ago that nonprofits resisted mergers.

Part of the problem, Harrington said, was they worried about sacrificing autonomy or losing their identity.

"There's a lot of challenges," he said. "Who the leadership is going to be - not just the CEO, but program direction, finance, operations."

And then there was the perception that nonprofits merged simply to stay afloat, signaling that their business practices might not be sound.

"A few years ago, one would think, 'Oh, goodness! What's wrong? How did you make a mistake? How did you mess up?' " said Tom McLaughlin, director of consulting services at the community development financial institution Nonprofit Finance Fund, which helped with the Centro Latino merger.

That attitude seems to be changing. Last summer, the Boston Foundation published a report titled "Passion & Purpose," in which chief executive Paul S. Grogan stressed the need for the state's nonprofit sector to collaborate following two decades of growth that some say may have created a glut of nonprofits. As of 2007, according to the foundation, there were an estimated 36,748 nonprofit organizations in Massachusetts - about an 88 percent increase from two decades ago. Together, they held about $207 billion in assets in 2007.

"In an expansive, booming economy, this kind of growth might be welcome or at least sustainable, but in an economy that is shrinking, it is cause for serious concern," Grogan wrote in an introduction to the report.

Mike Durkin, head of the United Way of Massachusetts Bay and Merrimack Valley, said he noticed the growing acceptance of nonprofit mergers at a recent meeting of executive directors whose organizations work with his.

"It was palpable how quickly and seriously those people were willing to talk about some type of merger or collaboration," said Durkin. "There was genuine talk about how we need to seriously figure out how we can reduce costs to fulfill our mission."

Even so, those like Harrington and McLaughlin who have worked on mergers, cautioned others to go slowly when considering an alliance.

That's what officials at the Family Nurturing Center and Dorchester CARES say they did. Board members at both agencies initially questioned how a merger would work: Could they integrate their e-mail lists? Would marketing materials need to be updated? And more importantly, would the merger keep the agencies strong?

"The first thing everyone asks is 'Who won?' " LiPuma said of the merged groups. "But, you know, this was a very much a joint effort."

Together, the agencies have a combined staff of about 20 and a budget of about $1.5 million - more than three times the budget of Dorchester CARES. They run programs, such as children's playgroups, and coordinate outreach efforts for new parents.

Other groups are still considering their options.

For instance, for more than a year officials from the AIDS Action Committee of Massachusetts Inc. in Boston have been speaking with executives from two other nonprofits, Cambridge Cares About AIDS and JRI Health Services, about forming an alliance.

"We're really after two goals, [one of] which is to increase the effectiveness of the service delivery system to people living with AIDS," said Rebecca Haag, chief executive of the AIDS Action Committee, which serves about 2,800 clients a year. "And then the second objective is clearly to find some efficiencies in the system."

Erin Ailworth can be reached at eailworth@globe.com.