Build Up Mass to Fight Over a Shrinking Pie. NGO Mergers Relocate the Grant Dependency Problem. They Do Not Solve It.
Since its founding, the nonprofit sector – and international aid and development in particular – has relied predominantly on external resources: grants, official development assistance, and philanthropy. That reliance was not a temporary arrangement. It became the architecture. The sharpest contraction of those resources in the sector's history has now made the architecture visible.
The sector's leading response is consolidation. Before challenging that logic, take it seriously; dismissing it is precisely the kind of shortcut that produces bad strategy.
Organizations are collapsing in real time. Competition for restricted grants has intensified. Overhead ratios are deteriorating as fixed costs hold while revenues contract. In that context, the consolidation logic holds together: fewer organizations competing for the same pool means survivors are better positioned, duplication declines, and remaining funding concentrates among entities with greater capacity. Fewer, stronger organizations. It sounds right.
Experts in this sector have arrived there. Writing for Devex in May 2026, Laura Boonstoppel of ThinkWell argued that global development organizations are spending too much on survival, and that consolidation – including the reallocation of reserves – is a rational response to resource contraction. The Center for Effective Philanthropy's 2026 financial instability survey finds similar dynamics, with consolidation among the responses organizations are actually pursuing.
The argument is sound. That's precisely what makes it dangerous.
What consolidation actually does well
Give it a full accounting before challenging it. Well-executed mergers produce real gains.
Shared back-office functions – finance, HR, compliance, IT – cut overhead without touching program delivery. Two organizations running parallel administrative structures can become one running a single structure, at a lower total cost. Where two organizations with overlapping mandates have historically split the same restricted funding, the merged entity competes once, with more institutional weight. Field operations, supply chains, and M&E systems can all achieve economies of scale. Technical expertise is no longer fragmented across organizations with nearly identical mandates.
A well-executed merger between organizations with complementary geographies and overlapping mandates can produce something more capable than either was alone. The efficiency argument isn't wrong.
The question is what it leaves untouched.
The pie is shrinking
The consolidated organization inherits the revenue architecture of its components. If both ran on grants, the merger produces an organization that runs on grants, at a greater scale, with a larger staff, more complex governance, and higher institutional stakes. The pie is shrinking, and fewer organizations cutting it will not change this structural trend.
On ODA: eleven OECD DAC members – accounting for nearly three-quarters of total ODA in 2024 – have announced cuts for 2025–2027. The OECD projects that global ODA in 2027 will fall back to 2020 levels. The US, which historically provided a quarter of all ODA, is projected to cut its contribution by 56 percent from 2023 levels by 2026, with further reductions expected beyond that. Germany halved its humanitarian aid and cut its development ministry. France, the UK, and Switzerland are also cutting ODA budgets, in several cases to fund surging defense commitments. The UK is on track for a 27 percent cut in 2026–27. This is a structural reallocation of public capital away from development, happening across multiple donor governments simultaneously.
The philanthropic pool is under equal pressure from a different direction. The headline figures from mega-donors – MacKenzie Scott’s multi-billion-dollar campaigns, the Gates Foundation’s accelerated giving ahead of its 2045 closure – create the impression of philanthropic health. The underlying data does not support it. Writing in the Stanford Social Innovation Review in Spring 2026, Mark Dobosz documents that broad-based philanthropic participation in the United States is in structural long-term decline: donor retention had fallen to 31.9 percent by 2025, and the share of affluent US households giving to charity has declined steadily from 91 percent in 2015 to 81 percent by 2024. Dobosz focuses on the domestic US philanthropic base. Still, the pattern holds across domestic and international philanthropy: giving is becoming more concentrated among fewer, wealthier donors, while the broad base of participation that once distributed philanthropic resources widely – and provided the stable floor beneath grant-dependent organizations – is eroding. For international NGOs, this means the philanthropic contraction is the same structural dynamic playing out simultaneously in the pool they depend on directly. Bilateral ODA and private philanthropy have usually moved in the same direction. They are both receding now.
A merged organization competing in this environment hasn't changed its exposure to that environment. It's concentrated its exposure in a single entity.
The environment that forced the consolidation doesn't change
This is what the efficiency argument misses. Consolidation responds to pressure without changing the conditions that created it. Grant dependency, single-instrument revenue architecture, and funder concentration all remain entirely intact in the merged entity. Two organizations dependent on USAID-adjacent and foundation funding that merge become one organization dependent on USAID-adjacent and foundation funding, navigating a contracting pool, with higher fixed costs, more stakeholders, and the full structural vulnerability of its predecessors now concentrated in one place.
Christian Meyer zu Natrup, founder of MzN International and one of Europe's most experienced practitioners of NGO revenue transformation, has put it plainly: organizations competing harder for ever-smaller slices of the same cake is the natural endpoint of a grant-only model. The merger creates one larger competitor. It doesn't change the cake's size, and by 2027, the cake will be smaller.
The Ford Foundation, Sorenson Impact, and MacArthur Foundation have launched a Collaboration Fund, a serious, well-resourced initiative to fund strategic collaboration across the sector. The intent is sound. But there's one question worth asking of any such initiative: are we funding the collaboration, or funding the transformation that makes collaboration stick? Grant-funded consolidation without accompanying business model change is coordination applied to a structural problem. The merged entity enters its next fiscal year with the same revenue architecture as the organizations it absorbed, and now there's no fallback.
The right question
Consolidation asks which organizations should survive. That's a legitimate question; the sector should face it honestly rather than pretending every organization currently in existence deserves to continue. But answering it isn't a strategy.
A more useful question is: do the survivors have a different economic structure from the organizations that didn't make it?
A merged organization that earns income from services and assets, builds corporate partnerships with genuine economic logic for both parties, and accesses blended capital that doesn't require philanthropic renewal is structurally more resilient. In that case, the merger may even be additive, bringing together capabilities that accelerate revenue transformation. But the resilience came from the change in the business model. Not from the consolidation itself.
A larger organization running solely on grants remains more exposed. In an environment where ODA is returning to 2020 levels, donor retention is at a thirty-year low, and capital previously flowing to development is now funding defense budgets on multiple continents, the stakes of that exposure are higher than they once were.
A question for the audience
Of the mergers currently underway, how many include a plan for what the combined entity will earn – not raise – in three years? How many due diligence processes include a revenue architecture audit alongside the financial statements?
If the answer to both is "none," we're not building a stronger sector. We're building a larger version of the same problem.
Citations
OECD. "Cuts in Official Development Assistance." Policy Brief, June 2025. https://doi.org/10.1787/8c530629-en
OECD. Private Philanthropy for Development – Second Edition: Data for Action. The Development Dimension, OECD Publishing, Paris, 9 December 2021. https://doi.org/10.1787/cdf37f1e-en
Dobosz, M. "Beyond the Mega-Gift." Stanford Social Innovation Review, 24(2), 46–53. Spring 2026. https://doi.org/10.48558/EN8A-R095
Meyer zu Natrup, C. Human Planet / MzN International Blended Finance Webinar, March 2026.
Ford Foundation / Sorenson Impact / MacArthur Foundation. Collaboration Fund Initiative, 2026.
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