Acquiring a college or university

“Mergers [in higher education] that make perfect sense from a strategic and financial perspective may not make sense from an operational and cultural perspective, given the ‘human element’ involved…[J]ust as mergers can fail because of the ‘human element,” so too they can succeed because of this element: specifically, competent managers who are aware of operational and cultural pitfalls, adequately plan and provide for them in the pre-deal phase, and are willing to devote ample time and resources to ‘manage’ them in the post-deal phase…”

–Richard J. Joseph, Co-Editor and Co-Author, The Handbook of Mergers and Acquisitions (Oxford University Press), p. 363

SOME INSTITUTIONS ACQUIRE A COLLEGE OR UNIVERSITY as a means of entering a foreign market, raising their international profile, and/or training their employees. The typical scenario looks like this:

* A group of investors, multinational corporation, college or university acquire a “broken” school located in a prime commercial market or attractive education destination.

* After assuming its liabilities and injecting capital into it, they reorganize the school, discontinue its unprofitable operations, and expand its profitable programs.  They might also launch new programs tailored to the educational needs of their own staff.

* Simultaneously, they obtain requisite operating licenses from local education authorities. They also procure the necessary approvals from the school’s accreditation agencies. Ultimately, these authorities and agencies have an interest in bolstering the financial viability of the school and avoiding a messy teach-out.

The acquisition may make perfect sense from a strategic and financial perspective.  However, will it make sense from a cultural and operational perspective –given the “human element” involved.

FOR DISCUSSION:

* What are the “pitfalls” (e.g., operational, cultural, financial, academic) of acquiring a college or university?

* How can these “pitfalls” be managed?

* What thorny issues might arise in the course of reorganization?

* How can these issues be effectively addressed to the advantage of all parties to the reorganization?

Let us know what you think.  Please indicate your name, position, and how you can be reached.

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