Trusteeship - May/June 2020 - 12

TA KEAWAYS
■ Many institutions are finding

themselves facing challenges that
lead them to deciding if they should
merge, affiliate, or close. Ninety-two
universities have closed or announced
future closures since 2016 through
February 2019, according to Education
Dive. From 2010 to 2019, there were
94 total mergers. Institutions must be
proactive and monitor their fiscal and
operational health and start to think
early on about hard choices they
might have to make in the future.
■ Mergers can be a good choice for

institutions if executed correctly.
Mergers can be used to improve
student outcomes and save money
and resources. Strategic affiliations
are another route some institutions
take and make sense when there's
three to five years before major
financial problems. One major
difference between a strategic
affiliation and a merger is the legal
structure. Private affiliations allow
institutions to keep their legal entity.
Affiliations can lead to higher quality
resources for the institutions.
■ For boards to successfully complete

a merger, there are several factors to
keep in mind. One factor is for boards
to address things such as the name
of the merged institution and the
mascot. These things are important to
the students and community. Another
factor is that these discussions about
closures and mergers also need to be
done confidentially to ensure continued
support. An institution must also keep in
mind that a merging process takes time
and is difficult to pursue at the end of an
institution's life cycle.
■ Sometimes a closure is necessary

when there are no good long-term
options. Marylhurst University, which
closed in December 2019, was an
example of this. Even with the closure,
Marylhurst was able to develop plans
to take care of their students. They
transferred or graduated 92 percent
of the enrolled students after the vote
to close. Marylhurst also transferred
distinctive programs with their
accompanying students and staff
to nearby institutions. Boards stay
in place after a closure to oversee
residual resources and assets.

12 TRUSTEESHIP MAY. JUN. 2020

■ A

2019 study found that based on an
analysis of eight years of Integrated
Postsecondary Education Data System
(IPEDS) data for just over 2,300 institutions, nearly 10 percent face market
stresses severe enough to make them
candidates for either closing or merging,
according to The College Stress Test:
Tracking Institutional Futures Across a
Crowded Market, a new book by academics that offers higher education institutions a way to measure their own health
in the context of broader market trends.
"Ten percent are likely to close and
another 30 percent are bound to struggle,"
says Susan Baldridge, a Middlebury College professor and a coauthor, with Robert
Zemsky and Susan S. Shaman, of The College Stress Test. "For that 30 percent, the
question of whether it is better to merge
than continue to struggle should be on the
table for boards."

The Importance of Being Proactive
As with many currently challenged higher
education institutions, Lutheran Church-affiliated Concordia College Alabama had
been shedding assets and students for years
and as of 2017, when Lyons joined, had only
400 students and about 90 faculty and staff.
Lyons was brought in with two masters
and two mandates: the Lutheran Church
Missouri Synod had slated the institution
for closure, had ruled out further cash injections, and the Concordia University System
Board expected Lyons to close the institution and dispose of its assets. But Concordia
College Alabama's local board continued to
hold out hopes that it could be saved and
had met with many potential investors.
Lyons worked with a potential investor
from Taiwan until the investor could not
line up enough partners, causing the deal
to unravel. Concordia College Alabama's
assets were later bought at auction by a
Korean minister to be used for Christian
missionary activities.
If there was a single lesson Lyons says
other executives at challenged higher

education institutions should learn to
maximize the opportunities for good
resolutions, and which many others interviewed reiterate, it is to monitor their institution's fiscal and operational health early
and to purposefully think early about what
for some institutions is the unthinkable:
merging or closing their institution.
"One of the challenges of an institution
that has financial challenges is when do
you decide to call an all hands on deck and
make a significant effort to address financial issues," Lyons asks. "When I came in,
we needed $8 million to $10 million to be
viable to pay off our debt and put money
into operation to remain viable. I had a
woman call me and say, 'If I gave you a
million dollars, would you be able to stay
open?' I had to tell her, "No ma'am, not
unless you have seven other friends who
can do the same thing.' I would have to add
that once the Lutheran Church made its
decision not to inject more money, that
also discouraged a lot of potential donors."
"I would say 90 percent of the time
mergers are not viewed as a strategic alternative until it is too late," says Rick Beyer,
a senior fellow and mergers and private
system affiliation practice area leader at
AGB Consulting. "Institutions looking for a
long-term partner usually start the process
late in their life cycle and thus have little to
offer another institution, whereas, if they
had started 18 months earlier, they would
have been in a much better environment.
I am, however, starting to see some consciousness among board members that it is
not business as usual. Institutions are now
starting to call us to explore options a couple of years in advance."
Institutions should ideally integrate
merger and closure analysis as a standard
board practice, say authors of a new book
on mergers, Strategic Mergers in Higher
Education. "Boards need to understand
that considering the possibility of mergers
and acquisitions should be part of their
strategic planning at all times," says Ricardo
Azziz, a research professor at the Univer-

Trusteeship - May/June 2020

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