Trusteeship - May/June 2020 - 16

COLLEGES AT A CROSSROADS: CLOSURES AND MERGERS

Patterns of Mergers and Closures

Strategic Affiliations

The pace of mergers has picked up, with 94 total combinations
The greatest opportunity for private institutions seeking longfrom 2010 through 2019, compared to 32 combinations from 2000
term strategic partners may be through formal system affiliations,
through 2009, based on data from IPEDs and analysis by EY-Parnotes Beyer.
thenon. The vast majority of merging institutions, more than 95
Those arrangements are distinct from mergers, with important
percent, have had fewer than 5,000 students and more than 80
implications for boards, Beyer notes. "One of the biggest differences
percent of such mergers have occurred between institutions within between a merger and private affiliation is the legal structure," Beyer
the same state. These mergers involve all classes of institutions,
says. "In a merger, the sell-side institution legal entity is typically
including private, for-profit, private liberal arts, and public instidissolved along with the board, president, and senior staff positions.
tutions. Many predict a further wave of consolidations driven by
Thus, mergers have not been widely well received by sell-side instiweak state support (for public institutions), a slowing flow of inter- tutions and, as a result, most mergers take place late in the life cycle
national students, and a smaller domestic cohort of students.
of the sell-side institution. Private affiliations allow institutions to
More higher education leaders are at least considering mergers,
keep their legal entity along with their board, president, senior cabsays Kasia Lundy, a principal at consultancy EY-Parthenon. "The
inet and degree granting status. As a result, sell-side institutions are
conversation is much different from three years ago, when this was now becoming more aware of, and interested in, private affiliations."
a taboo matter among board members and institution leaders,"
One example, he notes, is TCS Education, which has created a
Lundy says. "People didn't want
nonprofit community system of
to talk about it, were nervous
colleges over the past 10 years
attending panel discussions
that six independent instituof mergers, and didn't want
tions have joined.
Strategic
affiliations
are
vastly
different
to leave their names behind
"Post-affiliation enrollment
because it might signal trouble.
from mergers. A private affiliation may make sense has grown from 3,000 to 9,000
The conversation and dialogue
students and these institutions
when higher education institutions have
around this has changed, as
together have successfully
three to five years of financial runway from
measured by the sheer level of
leveraged centralized serproblems, but not if an institution is in the
interest in the topic, the frevices and each institution has
late stages of its life cycle.
quency with which it pops up,
gained access to higher quality
and the number of attendees at
resources," Beyer. "We can
panel discussions."
anticipate additional private
Not all mergers are successful, notes Jacobs. "The creation of
system affiliations to be developed over the next five years."
a stronger surviving institution is the goal, but that sometimes
TCS, National University System, and Saint Leo University are
does not happen," Jacobs says. "Some acquired institutions remain
the three most active on the buy-side, says Beyer. "It takes vision
balkanized. The measure of the success of a merger is not just
and leadership and strong financials to be a buyer," Beyer says. "You
whether it happened but also whether you get the gains you
can't do it from a weak situation. The focus of all three institutions
expected."
is that they are trying to transform their model. There are great
In choosing partners, institutions must look beyond cost savopportunities for other higher education institutions to join on the
ings to more strategic factors as a reason for merging.
buy side but they need to understand that this is a long-term com"Many institutions premising merger values on realizing synermitment of perhaps 10 years."
gies and reducing back office costs savings find such savings are not
enough," Lundy says. "Strategic considerations can be more effective The Importance of Institution Cultures
drivers. For example, if a small niche arts school comes together
Belmont University is another institution that has been on a trajecwith a larger university the programming of the small art school
tory of growth. In January, it announced that the Christian instimight complement a weak programmatic aspect of the larger institution would merge with small Watkins College of Art in August
tution while the smaller niche school gets more resources and wid2020. Belmont earlier merged with O'More College of Design.
ens its programmatic offerings. That can be a win-win."
Both Watkins and O'More had fewer than 200 students.
Proximity of campuses can play a key role in the feasibility of
But considerable opposition to the deal has arisen in some
mergers notes USG trustee Wilheit. "There is considerably more
quarters, given the religious orientation of Belmont-students take
flexibility if students can just drive or take public transportation to
required religion courses and the institution has a policy against
access programming offered at the other institution," Wilheit says.
hiring non-Christians to its faculty. In January, more than 1,600

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Trusteeship - May/June 2020

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