The landscape in higher education continues its transformation (def: is being rocked by change). Between 2014 and 2019, 129 private higher education institutions closed their doors, 18 merged with other privates and 12 reorganized to consolidate administration. Among public higher education institutions, 11 closed their doors, 20 merged and 33 have acquired private higher education institutions. Additionally, 1,094 for-profit higher education institutions closed while others participated in mega-mergers, such as Purdue / Kaplan and Strayer / Capella.
This dramatically changing landscape is due to a number of factors, including:
- The changing demographics in relation to traditional students and non-traditional students. The demographics of the traditional students who are enrolling immediately out of high school will precipitously drop in 2025. In comparison, the enrollment of non-traditional students should grow as they are forced to adjust to a rapidly changing economy.
- Differing reasons why these two groups decide to enroll in college. Traditional students attend college to get a degree that will give them an entry-level position. Non-traditional students come to college either to get additional degrees or to retool their experience to be able to stay relevant in their industry.
- Job availability in relation to the economy. Many jobs are going away, thanks to technological innovations and automation. However, there are numerous jobs being created that need new and improved skill sets, such as the ability to analyze large data sets.
- The year 2018 was the first year that private investment in tuition exceeded that of public funds. Furthermore, student debt exceeded $1.5 trillion in 2019.
There are many reasons why higher education institutions may want to consider a merger. These reasons could be to increase market research in relation to student enrollment, reach an underserved target market of students (such as nontraditional student), add specific programs that will extend the institutional reach or incorporate new technology platforms that will streamline instruction.
Of course, this could feel like shotgun marriage if not handled strategically. Instead, making the possibility of a merger a key part of a strategic planning process helps an institution begin to see whether an arranged marriage would be wise in helping the institution survive the tsunami of economic change and be positioned to thrive in a rapidly evolving environment.
That environment—the reasons why to consider a merger–involves all of what was mentioned earlier: changing demographics in relation to traditional and post-traditional students, differing reasons for attending college, job availability and finances. In addition, there’s another reason to consider a merger – the opportunity to add programs and students who are aligned with your institutional mission, thus expanding your institutional presence.
Myths about mergers
Many higher education leaders balk at the idea of mergers. That’s because there are many myths about mergers and acquisitions that haven’t been refuted:
- Mergers are solely for failing institutions. Mergers can actually make sense for institutions that are doing well, but want to build additional market share, which can be the difference between organizational life and death in today’s turbulent world.
- Mergers are the proverbial “third rail” of strategic options. Discussion of mergers should be part of the strategic planning process. This helps institutional stakeholders begin to take the charge off of a merger and instead see the possibilities that such a deal might offer.
- Mergers are about being acquired and losing identity, brand and history. A merger can actually reinforce the institutional identity, brand and history through giving it an invigorating boost and an extended reach through new programs, top faculty and new students.
- The institution’s merger situation is absolutely unique. Most mergers actually aren’t unique. They come about because both institutions decide that they are able to capitalize on the assets that are being brought to the table. This move creates synergy that can help catapult both institutions, once merged, into a transformational relationship that will lead to additional market share and a promising future.
Barriers to mergers
With the myths busted, we do need to say that barriers do exist to create a merger.
- A failure to consider a merger as part of the institutional strategy. It would be easy for institutional leaders to consider a merger as an after-thought. They may think that a merger should only be considered when things have continually gone wrong, whether that’s a steady declining enrollment, loss of once-premier programs or a precarious financial position. However, making discussions about potential merger part of the institutional strategic planning process offers many benefits. These include the opportunity to develop multiple scenarios about when mergers would be advantageous. In addition, having the opportunity to discuss the possibility of a merger during this type of process can help with gaining stakeholder buy-in if a merger opportunity does appear at a later date.
- A lack of vision in relation to the merger by governing boards and leadership. Higher education governing boards and leaders need to start delving more deeply to learn about mergers in order to develop a far-reaching vision to be ready when and if an appropriate merger presents itself. This exploration can be through attending conferences, participating in webinars, or learning more such as The Change Leader’s recent podcast on mergers.
- A lack of strategic planning and focus on sustainability and growth. Mergers can result based on a short-term end game. However, by taking a broader approach through strategic planning, mergers can be evaluated and designed to help the participating institutions smoothly join together to create a culture of sustainability and continued growth
- Focusing on incremental growth as opposed to transformational change. Institutional leaders in higher education often look for incremental growth, whether through student enrollment, funding or programmatic achievement. However, there are other types of growth that could be more meaningful to institutional survival in these chaotic times. That’s where mergers come in because they actually hold great promise for creating a new way of being if done right. For example, a merger can offer a way for institutions to go through transformational change that sets up the merged institutions to thrive in increasingly difficulty times.
- Waiting too long. The nature of higher education is slow moving—even glacial at times—so it’s not surprising that leaders often are not comfortable with change. However, by including the possibility of a merger regularly in the strategic planning process, leaders can begin to position their institution to take timely steps if the need or desire to form a merger arises.
- Organizational culture. Mergers in higher education can have a tremendous negative impact on organization cultures if not handled well because faculty want a say in governance issues. The flip side also is true. Therefore, it’s important that faculty members are involved early on in the strategic planning process when the discussion of mergers is initially put on the table. This will enable leaders to identify early adopters among faculty members, take note of faculty concerns and also to begin to offer data that faculty can use to analyze the need for mergers. By giving faculty a role in discussing the possibility of a merger, leaders can reinforce an inclusive organizational culture that continue when—and if—a merger takes place.
In a future blog, we’ll go into more detail about what you need to think about if you are planning to participate in a merger or acquisition.