Strategic Mergers in Higher Education

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Strategic Mergers and Alliance Consulting for Higher Education Institutions

 

Welcome to the pivotal crossroads where higher education institutions grappling with declining enrollments, financial challenges, and the drive for expansion find tailored, strategic solutions for mergers, alliances, and growth.

 

By confronting these challenges head-on, you’re already on the path to finding solutions. Our strategic consulting services are crafted to tackle these challenges, helping higher education institutions navigate toward holistic, viable, and sustainable solutions. 

 

For those of us old enough to remember, our industry is in a position reminiscent of corporate America in the 1980s, ’90s, and early 2000s, when American corporations underwent a (painful) transformation called “restructuring,” a euphemism that meant things changed in a big way, and many people lost their jobs. Higher education never went through those rough times. Until now. 

 

The higher education industry finds itself facing a storm of challenges, and The Change Leader is here to help guide you on the best path for your institution. 

 

Bespoke Consulting for Institutional Evolution

Our consulting services are centered on guiding institutions through the complexities of expansion, consolidation, and joint ventures while holding your institution’s vision, mission, values, and stakeholders at the heart of decision-making. 

 

Strategic Guidance for Mergers and Alliances


Strategic mergers and alliances can be critical in addressing declining enrollment and financial pressures. We help you identify and partner with institutions that align with your goals and complement your strengths, ensuring mutually beneficial outcomes.

 

Navigating Declining Enrollment and Financial Strain through Strategic Mergers and Alliances

In response to the dual challenges of declining enrollment and financial strain, strategic mergers and alliances offer a viable pathway forward. Our consulting services focus on guiding institutions through the intricacies of these collaborative solutions. We assist in identifying potential partners whose goals, values, and resources align with yours, ensuring a merger or alliance that is not only feasible but also beneficial in the long term.

 

Is your institution considering a merger, alliance, or partnership? The Change Leader can help. Institutional leaders look to our experts to help you:

 

  • Find possible strategic merger partners to grow enrollment, build or improve your programs, create efficiencies, or find homes for your students.

  • Conduct culture surveys to see if cultures are complementary (the #1 reason for failed mergers is culture).

  • Help with the post-merger accreditation, regulatory, and post-acquisition organization merging to ensure the two institutions work as one.

Your Best Path Forward

Choosing between merging, selling, or forming a partnership is a pivotal decision. We provide the insights necessary to navigate these options, guiding you to the strategy that aligns with your institution’s vision and goals.

Learn about our Mergers and Alliances Consulting Services Specific to your needs: 

 

Alliances, Partnerships, and Joint Ventures →

 

Acquisitions: Buyer’s Side →

 

Mergers: Seller’s Side Services

 

If you’re unsure of your best path forward, contact The Change Leader.  We’re here to help you determine the most advantageous path for your institution. 

 

A Deeper Look at Higher Ed’s Challenges, Opportunities, and Solutions

 

Higher education finds itself in a mature to a declining market characterized by declining enrollments, lack of differentiation, and an increase in market consolidation (M&A activity) and/or college closings. This mismatch of the “demand curve” has many institutions looking for alternative strategies to survive. Enter strategic mergers in higher education, acquisitions, partnerships, collaborations, and consolidations. 

 

There are multiple reasons for the increased strategic higher ed mergers, including institutions wanting:

 

  • New markets/customers/programs
  • New technologies
  • Gain efficiencies in operations
  • Not go out of business / close their doors

 

This last reason seems to be the big driver in higher education M&A activity, e.g., we’ve seen a number of smaller colleges and universities under financial stress that are looking for ways to solve their problems through mergers/acquisitions and alliances.

 

Is your institution considering a merger, alliance, or partnership? The Change Leader can help. Institutional leaders look to our experts to help you:

 

  • Find possible strategic merger partners to grow enrollment, build or improve your programs, create efficiencies, or find homes for your students.

  • Conduct culture surveys to see if cultures are complementary (the #1 reason for failed mergers is culture).

  • Help with the post-merger accreditation, regulatory, and post-acquisition organization merging to ensure the two institutions work as one.

 

 

 


 

FAQs

FAQs

Higher Education Mergers Frequently Asked Questions

What are higher education mergers?

Higher ed mergers are the combining of two or more colleges or universities into a single entity or a system of institutions. 

What are the various types of higher education mergers and acquisitions, partnerships, and alliances?

A higher education merger is a generic term for the combining of two or more higher education institutions into one institution or
a system. Of this, there are four types of activities that come under the category of mergers and acquisitions (M&A).

 

  • The higher ed acquisition entails one institution purchasing another. There are generally two sides to the transaction:

    • Buy-side – one institution acquiring another.
    • Sell-side, an institution making itself available to be acquired.

  • Partnerships are a form of merger in which two or more institutions share services. These could include the sharing of front- or backend services, technologies, and other services that can result in contractual savings through collaboration.

  • Alliances serve higher education institutions by allowing students to take courses for full credit at other institutions. This enables institutions to offer a broader scope of programs and courses while keeping in their overhead costs (faculty, buildings, etc.) to a minimum. 

 

 

How long does a typical merger take?

This depends on the complexity and business structures of the acquirer and acquiree, as well as if the institutions offer federal financial aid.

 

Most institutions fall in the range of 6 months to 2 years. 

 

The shortest period of time we’ve seen is 6 months, and that was for two institutions that were accredited by the same accreditor and did not offer federal financial aid. The longest was 2 years, but that was a highly complex transaction that included attempting to transition a for-profit institution to a nonprofit where there were Title IV regulations in place.

 

What are the steps to merging two higher ed institutions?

Generally, there are five steps for your university or college to merge with another institution.

 

  1. Identifying potential merger targets. There are multiple considerations for this step, including the vision for the acquisition, institutional synergies and compatibilities including culture, financial obligations of the acquiree, and what you want to accomplish by acquiring or being acquired by another institution.

  2. Signing the LOI and conducting due diligence. Once a potential acquisition target is determined and the boards of the two institutions are in agreement, a letter of intent is generally signed. This enables both parties to conduct due diligence to ensure that everything the acquiree says is correct, as well as the acquiree understanding the acquirer and their culture and possibilities going forward.

  3. Contacting regulatory bodies. Higher Ed mergers can be very complex due to the various federal, state, and accreditation compliance and regulatory bodies that oversee higher education colleges and universities. Each of these has its regulatory standards that must be met.

  4. Closing the deal. This is probably the most anti-climactic of all the steps in a typical acquisition. The two institutions sign the agreement and exchange whatever the terms of the agreement say.

  5. Post-merger restructuring and organization redesign. This may be the most complex of all the five steps in that major organizational changes must be made. This is one of the primary areas with which The Change Leader assists institutions when merging.

 

 

Should I consider merging with another institution?

Possibly – it depends…

 

Most institutions consider merging for multiple reasons. 

 

First, from the buy-side, boards and/or administrations don’t think about strategic mergers as a way to grow enrollment, add new or improve current programs, and/or expand the footprint of the institution. Most institutions think only about organic growth, whereas inorganic may be smarter and less costly. 

 

Second, from the sell-side, the main reasons institutions don’t consider being acquired by another institution, despite trending down with enrollments and finances, they are too “wedded” to their brand, the alumni pressure to not be acquired is fierce, and/or they feel like “selling” says they are failing in their duties.

 

In cases such as these, boards aren’t able to face up to their fiduciary duties to the institution and their students. They frequently wait too long to decide until they get to the point when the finances are critical, which in the eyes of an acquirer, is too late.

 

What are some of the organizational design considerations when considering a merger or acquisition with another college or university?

When merging with another higher education institution, there are multiple organizational design issues to be resolved when combining the two institutions, including:

  • Determining who will be on the governing board.

  • Selecting the new president.

  • Designing the new organization structure, e.g., who will be the new Provost, deans, etc?

  • What programs will be retained and what will be eliminated? 

  • What positions will be retained, what will be eliminated, and the terms for those released?

  • What services are retained?

 

The bottom line, it is a highly complex change and one that can take a significant amount of time.

 

Are there downsides to merging with another institution?

There can be – despite mergers having the opportunity to be very productive for higher ed institutions, not all are successful. Whereas there are no statistics for higher education mergers, corporate mergers are successful only about 25% of the time. 

There are a lot of factors for why a merger may not be successful; they include:

  • The acquirer takes on more debt, deferred maintenance, or liability (Title IV or otherwise) than they should.

  • There is significant resistance to change from faculty, alumni, or other stakeholders. This frequently results in votes of no confidence against the board and administration.

  • Regulatory issues make the path forward difficult. This can include the Department of Education and/or the accrediting bodies giving permission for a change of ownership/control.

  • Organization design issues abound, e.g., the two institutions are unable to determine who will be on the governing board and who the new president will be.

  • The culture of the two institutions is very different. This frequently can happen when you are combining two very different universities, e.g., an R1 and an online institution. Special care must be taken with transparency and communication in this type of situation (and in fact all situations).

 

 

 

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