Mergers and acquisitions (M&A) are increasingly part of the strategic conversation for charity and not-for-profit boards. The Australian Institute of Company Directors’ Not-for-profit Governance & Performance Study 2025–26 found that 20% of not-for-profit organisations expected to discuss a merger in the next 12 months. The Pitcher Partners June 2025 NFP Survey indicated that consideration of M&A had risen from 15% in 2022 to 71% in 2025.
These statistics are not surprising. Many charities and not-for-profits are facing a combination of funding pressure, increased compliance costs, workforce challenges and growing demand for services. In that environment, a merger or acquisition can be a way to preserve services, improve financial sustainability and increase impact. However, in the charity context, the question is not simply whether a transaction can be completed. M&A activity, and how it is structured, also needs to support the organisation’s purpose.
The choice between an entity-level transaction (that is, a membership transfer or share acquisition) and an asset or business transfer will shape what is preserved, what is left behind, how risk is allocated and how clearly the transaction can be shown to advance the organisation’s charitable or not-for-profit purpose.
Structuring for purpose
The transaction structures used in charity M&A require sector-specific consideration. A charity may acquire the target entity through a share acquisition or, for a company limited by guarantee, through a membership transfer. Alternatively, the charity may utilise a business or asset transfer where it acquires particular assets, contracts, employees, programs or business operations, with the charity undertaking the acquisition directly or via a related corporate entity. What distinguishes the sector is the lens through which these options should be assessed.
These options should be tested against charitable purpose and associated registrations, existing and desired tax concessions and exemptions, stakeholder expectations and practical implementation. In commercial M&A, structure is typically optimised for operational and financial efficiency and risk allocation. In charity M&A, those considerations remain relevant, but purpose alignment sits alongside them.
Directors must act in good faith, for a proper purpose and in the best interests of the charity. Transaction documents and board papers should explain how the transaction (including the chosen structure) is aligned with, and advances, the charity’s purpose. Boards and advisers must also bear in mind that Australian Charities and Not-for-profits Commission (ACNC) registration does not automatically mean an organisation will be eligible for exemptions from duty or other state and territory taxes. Duty and other tax consequences should form part of structuring considerations from the outset.
Financial distress and merger control can also affect structure, timing and risk allocation. For more detail, see our previous G+T articles, Merging with a charity in financial distress: a practical guide for directors and Major overhaul of Australian merger laws: what charities and not-for-profits need to know.
Share and membership transfers
Beyond the usual drivers for a share acquisition or membership transfer, a transaction structure of this nature can be attractive where continuity is important. ACNC registration and associated tax concessions sit with the relevant entity, meaning an entity-level transfer can generally preserve these without the regulatory waiting times associated with establishing a new entity. While the risk profile differs from a business or asset transfer, attention must still be given to alignment of charitable purpose across the group structure and to governance arrangements where entities operate with different objects or constitutions.
The advantage of continuity comes with the risk of inherited history. In addition to the usual diligence issues, charity acquirers should consider governance arrangements, ACNC compliance history, funding conditions, tax exposures and whether the target’s operations remain aligned with its stated purposes.
Member dynamics add a further layer of complexity. Unlike shareholder drag-along or tag-along mechanics, in a company limited by guarantee, careful planning is often required to determine whether a change to a sole member model is viable. This is particularly the case where existing governance arrangements require active engagement with large numbers of members. In some circumstances, the difficulty of obtaining sufficient member engagement may lead to a pivot to a business or asset transfer. Governance matters and approval requirements must be considered early, with attention to whether the desired structure can be implemented in practice and whether clear transitional arrangements are in place for members and boards.
Business and asset transfers
An asset or business transfer may be preferable where the acquirer wants particular operations, contracts, relationships, assets or capabilities, rather than the target entity as a whole. This approach can be appropriate where only part of the target’s operations fits within the acquirer’s charitable purposes, or where the acquirer wants to limit exposure to legacy liabilities.
An asset transfer does not remove the need for purpose analysis. Even where a charity is acquiring only part of another organisation’s operations, it should be able to explain why those operations advance its own charitable or not-for-profit purpose.
Acquiring a for-profit business
The structuring analysis can become more nuanced where a charity is acquiring a for-profit business. This is increasingly relevant in sectors where charities and commercial providers operate alongside each other, including health, education, disability services and aged care.
The threshold question is whether the target’s activities can be aligned legally, operationally and reputationally with the acquirer’s charitable purpose and operating model. If the plan involves converting the target into an ACNC-registered charity, the prospects of achieving that outcome, and the consequences if it cannot be achieved, should be tested early.
Where conversion is not intended, the charity will need to manage an ongoing commercial subsidiary or business, with its own governance, tax and reputational implications. In some cases, an asset acquisition may allow the charity to isolate the mission-aligned parts of the business. In others, an entity acquisition may be preferable because it preserves operational continuity.
Key takeaway
There is no one-size-fits-all structure for charity and not-for-profit M&A. Structuring analysis requires boards, management and their advisers to carefully consider how the transaction and the chosen structure advance the organisation’s purpose, how risks are allocated, and how implementation works in practice. The best structure is generally the one that sets the organisation up for long-term success and ongoing furtherance of its charitable purpose.
How we can help
Our Charities and Social Sector team regularly supports charities and not-for-profits to plan, structure and implement mergers, acquisitions, business transfers and strategic restructures. We work with boards and executives on transaction structuring, governance processes, due diligence, regulatory approvals, member approvals, tax and duty considerations, and post-completion integration planning.
If you are considering a merger, acquisition or strategic restructuring, please get in touch with our specialist Charities and Social Sector team.