Pitcher Partners 2025 not-for-profit (NFP) sector survey has shown Mergers and Acquisitions (M&A) have become a key consideration in response to mounting financial pressures given the escalating operational costs faced by NFP organisations.
Just as the persistent cost-of-living crisis continues to exert financial pressure on household budgets, a cost of operations crisis appears to be hitting NFP organisations. Our latest 2025 NFP sector survey reveals that operating costs, excluding staff expenses, have grown to become one of the two most significant challenges, with 56% of respondents identifying it among their top four concerns – a notable increase from 32% in 2022. This escalation underscores the broader economic strain impacting the budgets of NFP organisations.
Interestingly, while staffing challenges remain, their perceived impact has lessened, with 56% citing this as a key issue, down from 78% in 2022, which is reflective of the slight increase in unemployment figures we’ve seen over this period. Similarly, funding pressures have slightly eased, and competition from other NFPs is now seen as a less pressing concern, dropping from 21% in 2022 to 12% in 2025.
In response to increased operational challenges, the survey’s results show a marked increase in NFPs considering M&A as a strategic solution. A significant 71% of survey participants are exploring M&A opportunities, a substantial rise from just 15% in 2022. This trend reflects a proactive approach to consolidating resources, eliminating redundant variable costs, and optimising fixed costs to enhance operational efficiency and increase resilience.
M&A could be seen not just as a survival tactic but as a forward-thinking strategy to amplify impact and ensure long-term sustainability. By uniting with like-minded organisations, NFPs can navigate economic uncertainties more effectively, streamline operations, and continue to fulfill their missions with greater efficacy.
Strategies to ease budget pressure
Australia appears to mirror its international NFP counterparts, according to insights from Pitcher Partners’ international network partner Baker Tilly. Financial stability and rising costs are emerging globally as the primary motivators for driving increased collaboration.
Locally, 52% of our survey respondents reinforce this finding, reporting an increase in collaboration (outside of a formal merger) across similar organisations to ease budget pressures. This trend mirrors the drivers for M&A. Pooling resources and expertise can reduce costs and create more resilient and effective organisations, underscoring the importance of robust fiscal health in sustaining long-term missions. Collaborating can also be a first step towards a more formal tie up between organisations.
Service delivery and budget management go hand in hand, but how organisations plan to respond to budgetary pressures in their service delivery had mixed responses. While 51% of respondents (unchanged from 2022) are looking to expand services to scale up their operations amid growing fixed costs, there has been a significant shift towards consolidation. Almost 40% of organisations are now leaning towards a more targeted approach to conserve capital by solidifying service delivery. This change marks a departure from the 2022 survey results, where expansion was more commonly pursued.
Outsourcing as a cost-saving measure
Another emerging trend is considering outsourcing elements of operations to lower-cost operators. 27% of respondents are exploring this option, a notable increase from 18% in 2022. This strategy is seen as a viable way to manage costs without compromising on service delivery while making an organisation more responsive to its operating environment by being able to dial capacity up or down more rapidly.
The role of leadership in uncertain times
Effective governance is critical as NFPs navigate financial pressures, evolving regulations, and shifting stakeholder expectations. Baker Tilly’s insights also emphasise that board leadership plays a key role in ensuring mission alignment and driving communication, collaboration, and operational adaptability to ensure long-term resilience and success.
What this means for you
As a NFP, it’s crucial to recognise the shifting landscape and adapt your strategies accordingly.
- Evaluate strategic collaboration opportunities: Identify complementary organisations where shared resources could reduce operational costs while maintaining service quality.
- Consider merger and acquisition potential: Develop clear criteria for assessing M&A opportunities, focusing on mission alignment and financial sustainability benefits.
- Optimise service delivery models: Review your program portfolio to focus resources on high-impact services that align with your core mission and financial capacity.
- Explore targeted outsourcing options: Identify non-core functions that could be outsourced to specialised providers to reduce fixed costs and improve operational flexibility.
- Strengthen board financial oversight: Engage your board in regular financial sustainability discussions and ensure diverse expertise in cost management and strategic planning.
