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How can a non-profit company acquire another non-profit company?


We are a small non-profit company that provides health care in the urban core of our city. A much larger non-profit that is also in health care has approach us about acquiring our company. Is that even possible? What would that mean for our customers? What about our management team and employees?


Non-profits can acquire other non-profits in a couple of different ways.

Asset purchase: Non-profits can acquire all the assets of another non-profit organization and absorb their operations into the surviving non-profit legal entity. The acquiring non-profit could choose to continue operating the acquired non-profit just as it was operating prior to the acquisition (including transferring all employees to the acquiring non-profit) or they could choose to restructure the organization.

Agreement to merge: Depending on its legal entity and tax status, a non-profit may agree to be controlled or completely merged into another non-profit. This is not really an acquisition in the traditional sense as it would not involve a purchase as their are no shareholders or owners of the non-profit to compensate in the transaction. Instead, this would require both non-profit boards to agree that their non-profit missions would benefit from such a combination. In this case, the combined non-profits could choose to operate at arm's length and even maintain separate legal entities (with one controlling the other) just as they were operating prior to the combination, or they could choose to merge both legally and operationally which could involve some organizational and board restructuring.