M&A Comes to Higher Education | From the Bell Tower
American higher education is facing the problem of too much supply and too little demand, but Europe's M&A experience could offer some solutions Steven Bell, Associate University Librarian, Temple University, Philadelphia, PA
My first academic library job was in a business library. I was a hot shot Dialog searcher who knew his way around the business databases, and that helped me land the job. It wasn't all glamorous online searching, however. I later found out I was also responsible for the Disclosure Corporate Microfiche collection. Oh, the joy of managing thousands upon thousands of company annual reports and SEC filing documents on microfiche cards! To my own surprise I grew fascinated with all the SEC documents, especially those related to merger and acquisition (M&A) activity. Knowing how to navigate all the filings was particularly helpful for M&A research in the pre-database days. It even led to an article and book about M&A research. Though I no longer specialize in business research, I still maintain an interest in M&A, following the corporate news and paying attention to the trends. With so many individual American higher education institutions struggling in these challenging economic times, the next M&A wave may be in our own backyard. At least that's the picture that's developing in Europe.
It's a rare thing
M&A activity in the industry is downright rare. When it does happen it is typically the outcome of some extreme condition. An announced merger between two colleges may be, as it was in the case of Dana College, a last ditch effort to keep one of the partners from fading into oblivion. As things turned out Dana College backed out of a proposed merger with Midland Lutheran College, was almost purchased by a private entity, and then ended up closing for good. Mergers are complicated to achieve, and then fraught with challenges in bringing two institutions into one. Given the loss of identity that occurs in academic mergers, they have few supporters.
Such is the case of a controversial merger being discussed in Louisiana between the University of New Orleans and the Southern University at New Orleans. Adding to the controversy is Southern's status as a historically black institution. Despite poor enrollments and graduation rates at both institutions, coming at a time when states can ill afford to prop up declining universities, supporters want these two institutions to remain separate to preserve their heritages.
The other type of M&A activity that may be on the rise comes when for-profit institutions acquire struggling non-profit colleges in order to acquire their accredited status (referred to as "accreditation shopping"), which is a way of purchasing instant credibility.
Looking to Europe
Just try to find a good example of M&A activity that is achieved for strategic advantage between two stable colleges and universities. Even though the libraries at Harvard and MIT recently announced plans to increase their cooperative efforts, I'm not anticipating their parent institutions to announce plans to become one entity anytime soon. Without good examples of our own, we may need to more closely follow what's happening with higher education M&A in Europe.
An informative report in the Chronicle of Higher Education detailed M&A in Finland, Denmark, and France. An obvious driver in Europe is efficiency, but more emphasis is being placed on merging to increase national economic competitiveness, research quality, and international reputation. If you read the article you'll find that our European colleagues are anticipating a future with fewer potential students, and instead of increasing their competition with each other they are demonstrating how to achieve strength and sustainability through mergers.
There's no ignoring some of the huge differences in American and European higher education systems—funding, admissions, tuition—what works there may be far more difficult to achieve here. Just consider that within a 50-mile radius of my institution in Philadelphia there are as many as 75 different colleges and universities of all types. Through mergers, Denmark has reduced the number of higher education institutions in its entire nation to just eight universities and three research centers.
Why so unpopular here
All this makes one wonder why American higher education is so resistant to the idea. Perhaps "resistant" is not even the right word; "completely ignores" is more accurate phrasing. There's no doubt that each of this country's 4000 higher education institutions are proud of all the symbols, rites, and myths that contribute to their unique culture. I imagine few are eager to let a long history vanish into the ether. It may just be American competitiveness that makes what's happening in Europe unacceptable here. Just look at all the hoopla over college rankings, and the efforts institutions go to in order to move up in the rankings or capture the coveted number one spot. That makes it hard to imagine any institution willingly acquiescing to a friendly or rival suitor. It's even hard to imagine two community colleges in adjoining counties agreeing to merge, let alone two major institutions.
We will eventually need to come to terms with the many underperforming and troubled colleges and universities in this country. Could mergers be one possible solution to the challenge of dropout factories?
Does someone have to lose?
The downside of any M&A activity is the inevitable shedding of assets. You may recall the heyday of American corporate M&A when infamous CEOs such as "Chainsaw Al" Dunlap acquired firms in order to disassemble their component parts and sell them off with little care to the impact on employees and surrounding communities. Bad memories of these destructive business practices may also contribute to the fear of higher education M&A. As the European examples demonstrate, M&A between institutions can be achieved in a humane, respectful way. Ultimately, however, since greater efficiency is the goal of most mergers, something or someone needs to go.
Unfortunately, academic libraries would likely be perceived as primary targets for the cutting board. Would a merged institution need two reference or metadata units? If they are within reasonable proximity to each other, anything on the table could be a candidate for the chopping block. Two universities with enough distance between them might still see the need for two separate campus libraries. However, putting them under one administrative team could make sense. Academic libraries have always led the way with cooperative activity. Even if our institutions have no plans to merge, our future looks to include merged collection building at the least and merged staffs is not out of the question.
I don't expect that the European M&A wave will soon reach our shores with any impact, but it's inevitable that American higher education will need to come to terms with its oversupply of sellers to fewer buyers. The smart institutions may be the ones that pay attention to what's happening in Europe and get serious about importing an M&A strategy.
Steven Bell is Associate University Librarian, Temple University, Philadelphia, PA. For more from Steven visit his blogs, Kept-Up Academic Librarian, ACRLog and Designing Better Libraries or visit his website.
