mergers acquisitions higher education

Why You Should Be Thinking About Mergers And Acquisitions In Higher Education

Why is it that when most people talk about mergers and acquisitions in higher education, the first thought that comes to mind is “failure”?

How is it a “failure” when the action results in a stronger institution serving a broader audience?

Perhaps we need to take a step back and have a detailed discussion about the pros and cons of mergers and acquisitions?

Let’s remember that the outcome should be about organizations coming together to create something more substantial, more productive, and efficient.

And let’s also remember that the process should not be one where the board and president chase after a “savior” after years of doing the same thing over and over, hoping for different outcomes.  Then, after years of failure, realizing the institution needs a new money source to keep the doors open.

“It’s really important in a merger to be committed to preserving the essence and positive characteristic of the institution that’s being acquired,” said Michele Perkins, president of New England College. “It shouldn’t be a dissolving of that institution but an enhancement.”

Mergers and acquisitions are a strategic tool used to deliver more value, and we in higher education need to stop viewing them as a “fire sale” to cover outstanding debts before disappearing.

But Why Mergers and Acquisitions?

Demographic shifts.  Geographic shifts in the population.  Fewer high school graduates. The rising costs associated with operations.  And let’s not forget that thanks to COVID, we have the uncertainty of whether we will be able to return to full dorm rooms, full dining halls, and full classrooms or have to make substantial investments in technology and training so that we can offer quality online education and services.

Mergers and acquisitions can offer solutions to address these and other challenges as well as opportunities in the market.  They can also be used to turn internal weaknesses into strengths.

And with that in mind, here are a couple of suggestions you should consider as we move forward in these extremely challenging times.

Hint #1: Make Mergers and Acquisitions a Regular Topic In Strategic Planning

Start the discussion focused on where your institution should be – the vision.  With that defined, discuss if a merger or acquisition would be an effective way to achieve the vision.  You want this discussion to be forward-looking, so avoid having the discussion focus on where the institution is today because that can lead to focusing on less transformative initiatives.

Hint #2: Focus On Your Vision and Ask If Mergers or Acquisitions Can Achieve Your Vision

With the focus placed on achieving the vision of the institution, you will be focusing on particular solutions, which will make the process more efficient.  For example, a faith-based institution lacking the resources to offer online programs might want to focus on other similar faith-based institutions that provide unique, viable programs and services, including a more robust online offering to the same audience.  In that scenario, cost reduction can come from economies of scale, and other benefits can come in terms of increased revenue from the online offerings.

Hint #3: Efficient Processes, Sufficient Resources & Urgency

The merger process is five stages – exploratory/consideration, pre-merger, merger, early post-merger, and late post-merger.  And to be successful, you need to have a committed and understanding governing body, the right leadership, a compelling vision, an appropriate sense of urgency, a robust communications plan, strong project management processes, and sufficient resources (human, financial, technological).

For more on this, I recommend Strategic Mergers in Higher Education by Loyd Jacobs and Guilbert Hentschke.

Hint #4: A “Robust and Redundant Communications Plan”

In 2017, the TIAA Institute published a report, Mergers in Higher Education: A Proactive Strategy to a Better Future?  And in that report, one of the key insights was the importance of a robust communication plan.

That plan should include a variety of events, as well as written, audio, and video content.  And your plan should also focus on two-way communication so that your audiences (faculty, staff, alumni, students, community, etc.) can have their voices heard, and so you can address their questions and concerns.

Closing Comments

You hear me ask, “what’s your vision” a lot.  And I usually follow that up with “what are you doing to bring that vision to life?”

The purpose of this article is to make sure you give mergers and acquisitions the attention it deserves because both offer tremendous value when appropriate.

I don’t mean to suggest that all colleges and universities should be running out into the world, searching for another institution (or organization) to merge with or acquire.  Just keep them on your radar and have a process in place for clearly defining how a merger or acquisition could help your institution achieve its vision – and have some people assigned to the exploratory/consideration phase that are on the lookout for the right opportunities.

Some of you reading this article are in a stronger position than others, and it’s always better to be in a position of strength when it comes to mergers and acquisitions.  Struggling institutions are less appealing to other institutions. They will find it difficult to negotiate the best outcome for their faculty, staff, students, alumni, and other stakeholders – and that means it will be harder for them to achieve their mission.

Written by

Strategic turnaround consultant and writer.

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