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In the contemporary philanthropic landscape, a quiet but persistent drumbeat has emerged. It arrives in the form of program officers nudging grantees to "explore alignment"—a euphemism that increasingly serves as a polite proxy for mergers and acquisitions (M&A). It appears in the glossy brochures of consulting firms presenting consolidation as the ultimate "silver bullet" for a sector facing financial headwinds. Most tellingly, it manifests in the boardroom refrain: "There are too many nonprofits, and we don’t need all of them."
However, a growing coalition of leaders from Common Future and Roanhorse Consulting is challenging this narrative. They argue that the industry-wide push for consolidation is not a strategy for building an equitable economy, but rather a shortsighted reaction to systemic funding scarcity.
The Myth of the "Silver Bullet"
Recent discourse has framed nonprofit mergers as an inevitable, if not essential, evolution. Proponents argue that the sector is bloated, plagued by redundant overhead and fragmented efforts. In an era of shrinking DEI (Diversity, Equity, and Inclusion) commitments and a shift toward shorter, more restrictive grant cycles, the pressure to "do more with less" has become the mantra of the day.
Yet, leaders like Jess Yupanqui Feingold, Jennifer Njuguna, Jaime Gloshay, and Vanessa Roanhorse contend that this pressure is misdirected. While duplicated overhead is undeniably a poor use of limited resources, the current focus on M&A often ignores the "community expense" of dissolving organizations that hold deep, specialized trust.
A Chronology of Constraint
The push toward consolidation did not appear in a vacuum. It is the byproduct of decades of structural challenges:
- Mid-2010s: As the community lending field expanded, organizations identified a critical bottleneck: the prohibitive legal and compliance costs required to serve historically underserved populations.
- Late 2010s: The finance industry continued its practice of "gatekeeping" technical expertise, making it difficult for grassroots organizations to scale impact-based lending.
- 2020-2022: The surge in social justice funding following the pandemic briefly masked the underlying fragility of the nonprofit ecosystem.
- 2023-Present: A significant contraction in philanthropic giving has occurred. DEI initiatives are being rolled back, and multi-year grants are being replaced by one-year renewals, forcing many organizations into a "survival of the fittest" mindset.
The Case Against "Absorption"
The authors of this perspective, drawing from their own experiences, emphasize that consolidation should be a choice made by those closest to the work, not an ultimatum imposed by funders.
Common Future, for instance, has navigated this space by rejecting the binary choice between total independence and full merger. Through an affiliation agreement with the Community Credit Lab, the organization preserved the Lab’s independent nonprofit status while integrating it as a controlled subsidiary. This model allows for shared infrastructure without the loss of identity or mission-specificity.
"What you get when you don’t merge is an ecosystem that is dynamic and rooted," the authors write. They point to the partnership between Roanhorse Consulting and the Moonsoon Fund—the nation’s first Indigenous women’s gender-lens investment fund—as a prime example.
Vanessa Roanhorse, CEO of Roanhorse Consulting, has spent over a decade building relationships with Indigenous matriarch entrepreneurs. Her firm’s efficacy lies in its "relational infrastructure"—a hyper-local, deeply specific understanding of community needs that a larger, merged entity would inevitably dilute. Because Roanhorse Consulting operates with its own intelligence and networks, it successfully identified investees like Dancing Butterfly Naturals—a business that emerged not from a cold database search, but from a collaborative hackathon grounded in a decade of trust-building.
Supporting Data and Evidence: The Cost of Scarcity
The argument against M&A is not just ideological; it is pragmatic. When organizations are forced to merge, they often lose the very "relational intelligence" that allows them to reach marginalized communities.
Data from the Bridgespan Group and the Indiana University Lilly Family School of Philanthropy consistently highlight that the organizations most vulnerable to M&A pressure are those already suffering from the greatest funding disparities: nonprofits led by and serving people of color.
When a funder pressures a small, Black- or Indigenous-led organization to merge into a larger, white-led institution, they aren’t just "streamlining operations." They are, in many cases, stripping the organization of its cultural sovereignty. The financial data bears this out:
- Infrastructure Costs: The legal and regulatory frameworks for impact investing remain costly and fragmented.
- The "Gatekeeper" Tax: Smaller, innovative funds often spend up to 30-40% of their operational budget navigating compliance and technical gatekeepers, costs that could be mitigated by shared back-office services rather than total absorption.
Implications for the Future of Philanthropy
If consolidation is not the answer, what is? The authors suggest a shift from "funder-led efficiency" to "ecosystem-led infrastructure."
1. Shared Back-Office Capacity
Instead of forcing a merger, funders should invest in shared services. By providing centralized accounting, legal, and HR support, funders can allow small, high-impact organizations to focus on their mission rather than compliance hurdles.
2. Patient, Flexible Capital
The current model of "clean org charts and tidy theories of change" forces nonprofits to distort their models to fit annual reporting cycles. Patient capital allows organizations to remain in the community, building the trust required to make systemic change.
3. Intermediaries as Risk-Holders
Large foundations and institutional funders should act as "risk-holders" for smaller, early-stage funds. By providing a financial buffer, they enable community-based entities to take the risks that traditional banks refuse to touch, such as "character-based" lending that ignores credit scores in favor of community ties.
Conclusion: Reframing the Question
The prevailing philanthropic narrative currently asks: "How do we reduce the number of organizations to save costs?"
The leadership at Common Future and Roanhorse Consulting proposes a more critical question: "What infrastructure does this ecosystem need to survive a moment of retrenchment, and what will it cost us if we let it collapse?"
When Indigenous success has been historically co-opted and erased, the impulse to merge organizations is the wrong tool. It ignores the fact that the most effective solutions are often found in the "messy," localized, and specialized work of smaller entities. The path forward is not to shrink the field, but to fortify it—providing the resources for existing, deeply rooted organizations to survive, collaborate, and ultimately thrive on their own terms.
As the sector faces a period of inevitable contraction, the goal should not be to build a landscape of fewer, larger entities, but to weave a stronger, more resilient tapestry of organizations that can hold the complexity of the communities they serve.
Pevita Pearce
Reynand Wu
