College mergers and related consolidation activity could gain momentum again as higher education leaders navigate the dual financial upheaval of COVID and a potential recession.
Just last week, it was announced that Bloomfield College, a small private institution in New Jersey, would become a branch of Montclair State University, the large public school nearby. The State of New Jersey contributed $12.5 million to facilitate the transaction. “This partnership could serve as a new national model for how institutions with similar missions can innovate through integration and become partners in student success instead of competitors,” the state chairman said. de Montclair, Jonathan GS Koppell, in a press release.
While public-private mergers may be rare, a higher education consulting firm is encouraging more administrators to consider the prospect of affiliation or consolidation. With the number of traditional-aged students declining, skepticism around the value of post-secondary degrees rising, and deferred maintenance costs rising, some campus leaders may not be acting fast enough to ensure the health of their establishment, according to Tyton Partners.
“The denial is so pronounced that there seem to be as many recent examples of institutions waiting too long to merge as there are examples of successful mergers,” the company says. “Too little, too late has become all too common in higher education and yet the number of failures continues to grow.”
Here are Tyton’s 9 key steps for directors evaluating a potential merger:
Make the merger decision
- Adopt a vision of the market: While campus leaders know their own finances well, many lack perspective on whether their programs are gaining or losing market share. Trustees and trustees must master their relative competitive performance to properly assess long-term institutional health.
- speak clearly: The extent of a college’s financial risks may not become clear unless leaders are open and transparent about “the business of keeping an institution afloat.” Leaders need to have unflinching discussions about markets, market share, consumers, and competition.
- Don’t wait for it to be obvious: Mergers are often difficult and painful, but these agreements only succeed when an institution remains relatively viable and has something to offer if it is absorbed by another college or university.
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- Act with conviction: Directors and trustees must present a united front in favor of the merger to inspire confidence in potential partners.
- Seek help from an expert: College presidents cannot rely on their networks alone to find a suitable merger partner. An outside expert is often more aware of the work involved in a merger and better placed to identify, approach and negotiate with a partner.
- Market your strengths: Engaging a potential partner is “actually a sales process designed to find the best long-term fit.” Directors must be able to promote their strengths and show how they will benefit a merger partner.
- Search strategically but broadly: Market consolidation, program expansion, degree expansion, geographic expansion, entry into non-credit offerings, or increase in specific capabilities or technologies are among the many factors that administrators need to focus when looking for a partner in a merger.
Choose a partner
- Let go of preconceived ideas: Do not assume that you fully understand an institution based on its size or status. For example, some large bureaucratic state universities can be remarkably nimble, while traditionally conservative schools can act on new expansive mandates from their boards.
- Understand your priorities: When entering into a merger, leaders should prioritize their list of economic and mission-driven goals, such as academic autonomy, employment of staff and faculty, and preservation of an endowment, or a myriad of other factors. Understanding which issues are primary and which are secondary is essential for a successful outcome.
Mergers between established institutions are, of course, more complex than a list of milestones. “Institutions facing potentially existential issues can use this list to spark a conversation that can better structure the merger process,” Tyton says. “It can make all the difference in preserving the institution’s mission and impact.” [soliloquy id=”900″]