Synergies: Consider Them Before You Start Down the Merger and Acquisition Path
Headlines of mergers and acquisitions in higher education abound. A 2021 article by former university president Michael T. Nietzel mentions six recent merger initiatives under consideration due in large part to enrollment declines, economic uncertainties and the impact of the COVID-19 pandemic. High hopes for a union between colleges are often accompanied by reports of frustrations, disappointments or failures. While much can be learned from merger attempts that have gone astray, less is articulated about those that work. What sets such arrangements apart?
A key word that emerged as we explored that question was synergies—that is, the extent to which entities joining together will allow them to be better off than they were on their own. Much has been written about this concept in the business sector. For example, Patel identified three types of synergies essential to corporate mergers: revenue, cost and financial. Or the ways the merger or acquisition will increase revenue significantly, reduce overhead and lead to a stronger, more vibrant and prosperous organization than either entity could accomplish on its own. While those factors are important in higher education mergers, we suggest there are at least three other vital synergies to consider: administrative, programmatic and cultural.
Some mergers happen because the parent institution wants fast entry into the online market, rather than to build programs from scratch. For instance, consider Purdue Global’s acquisition of Kaplan Higher Education. Purdue had a limited online presence prior to founding Purdue Global. With Kaplan, it acquired 14 campuses and learning centers and Kaplan’s students and employees. Kaplan is expected to serve as Purdue Global’s exclusive OPM (online program manager) and provide back-office services that will alleviate administrative demands on Purdue Global.
The founding of UMass Global—an initiative between the University of Massachusetts and Chapman University System that created a strategic partnership between UMass Online and Brandman University—is another example of two institutions joining forces to expand educational opportunities for the adult, part-time, online and on-ground sectors. Though too soon to tell how it will work out, we include it in this example to illustrate that synergistic relationships can be formed between institutions in new ways, not only by mergers or acquisitions. There is no set model; it is about what works now to help the partners achieve their long-term goals.
Of course, fit includes expectations. As noted in a recent article by Lederman, being the biggest is not necessarily the best strategy. For example, the University of Arkansas took a slow, deliberate, approach to expanding its online market share. When an initial attempt was not as fruitful as expected, the university regrouped and created a new institution by purchasing—for a nominal sum—Grantham University. Grantham appealed to Arkansas in part because it is well regarded among students. Arkansas appealed to Grantham because the time had come for it to make a major change to thrive.
Growing online enrollments is not the only motivation for mergers. Programmatic synergies can strengthen relationships between institutions if corresponding cultural issues around faculty, policies and processes do not conflict. For instance, the merger of Clarkson University with Union Graduate College represents an example of ways that financially sound institutions join to capitalize on each other’s strengths. As quoted by Eisenberg in an essay on the merger, then president of Clarkson Anthony Collins said the merger would “bring together two strong, stable and financially viable institutions, and … leverage their complementary curricula and significant resources.” According to a report by Rogers, the merger allowed Clarkson to consolidate administrative functions for its graduate programs with the Capital Region campus. Furthermore, both entities valued being action-oriented, problem-solvers and entrepreneurial. Talks between administrators of both institutions had taken place for over a year.
A student-centric culture and similar student market demographics can also be strong cultural factors for productive mergers. In an article by Hall, a factor in the successful merger of the College of New Rochelle (CNR) with Mercy College, fit was key, and fit meant students. Both institutions served an older than traditional age, minority and low-income student body. Therefore, it was quite easy for Mercy College to extend its programs and services to CNR. Furthermore, faculty were familiar with teaching that segment of the adult student population.
The value of synergies within the context of higher education mergers can be summed up well by a conversation we had with Dr. Stan Ikenberry, former president of the University of Illinois system. He recommended, “that institutions don’t wait too long to get started on discussions where synergies are clear. It’s best to get started when one has something to offer, and the potential partner has something to give back and the strengths are in different areas so each one can bring something of substance to the table. Two relatively strong, stable institutions or campuses that have something to give each other and where the sum of the parts is greater than the whole is the type of collaboration that is useful to work with.”
To that end, we recommend that before colleges and universities start conversations that might lead to a consolidation, they ask themselves the following:
- Does data exist to show that both institutions will benefit from the merger?
- How does your institution programmatically complement that of the potential partner and vice versa?
- In what ways will the merger broaden the entities’ sphere of influence?
- Will the merger benefit students? If so, how? Does data exist to support the answer?
- Can one institution reduce the other’s administrative overhead, so both can build on existing strengths seamlessly?
- Early on, how will you engage faculty, staff and students from both institutions in discussions about the merger?
- How similar or different are the institutions’ values, traditions and norms?
- What mechanisms will be in place post merger for continued academic collaboration if appropriate?
- Will a collaboration or merger grow market share more than the sum of its parts?
Deep partnerships are challenging and expensive, but they can be transformative if done well and for the right reasons. Before embarking on a merger, acquisition or other deep partnerships, it is important to evaluate the costs and benefits of the partnership clearly and honestly, ensuring that programs, administration, faculty and culture are part of the equation.
Author Perspective: Administrator