CHICAGO — Higher education experts have this message for college leaders considering mergers: Don't wait.
When a university is in dire financial straits and facing the possibility of closure, the window for an optimal merger typically closes long ago.
Struggling institutions often “wait until the last minute and think, ‘Now it’s a good idea to find a merger partner.’ No one will touch it,” says Ricardo Azziz, founder and director of the Center for Mergers and Acquisitions in Higher Education. He said this at the Higher Learning Council's annual meeting last week.
“No one wants to merge with an institution that has too much debt and is unbranded and unregistered,” he added.
Besides completely defying the odds, difficult circumstances are making mutually beneficial mergers difficult.
“People wait too long and end up losing their ability to negotiate,” Azziz said. As a Principal at SPH Consulting Group, I advise on university mergers.
Once negotiating power is gone, mergers are typically little more than real estate transactions, he added.
Azziz and his fellow panelists argued that more mergers are needed as enrollment and the traditional college student population decline. This situation leaves what Azziz described as “massive overcapacity” in the higher education sector.
A possible merger with another institution may be included in the university's strategic plan. Karla Leeper, Vice President for Strategic Communications and Public Affairs he said during a panel at the University of Kansas.
Leeper, who went through a merger while currently serving as an executive at Augusta University in Georgia, said that in many cases, strategic plans focus on incrementally doing more of what the university is already doing. But colleges often fail to implement these plans, and the consequences of failure are even greater in an environment of declining enrollment at small colleges.
“If we’re an institution in a difficult situation, this is devastating,” Leeper said. “It looks like things are not going well. You sit down and make a plan and hope it helps, but it doesn’t.”
If a university can find the right partner at the right time, it can access more resources and brand awareness, and the partner can expand its geographic or programming depth. And most importantly, it can prevent closures. Leeper said closures are typically sudden and leave students “trying to figure out what to do.”
Mergers and acquisitions are not the only way to collaborate with other universities.
Richard Katzman, a fellow at the Center for Mergers and Acquisitions in Higher Education and a senior consultant at SPH, pointed to networked universities. In these cases, institutions collaborate on areas such as improving enrollment, technology, courses, and graduation rates rather than fully joining the organization.
He also pointed to partnerships with companies, such as Google's initiative to provide free educational services to community colleges.
Despite all the potential benefits, there are also many obstacles and challenges.
Among them, panelists pointed to public scrutiny, pushback from campus stakeholders, the complexity of completing the merger, and the financial risks of taking on another university's debt and operations.
“You have to do smart, intelligent due diligence to make sure it’s not a one-time windfall and that you’re not actually going to have a problem,” Katzman said.
Editor's note: Ricardo Azziz wrote: monthly column Merger or Higher Ed Dive. His opinions are his own.