Nonprofit Resources
When Your Institution is Facing an Uncertain Future: Merger and Acquisition Considerations
If your higher education institution is facing an uncertain future, one potential path is to consider a merger or acquisition. Joining forces with another institution, either in the same geographic region or a new market, could provide enough opportunity for sustained growth to avoid an imminent closure.
High-Level Considerations
Here are some potential benefits and challenges of mergers and acquisitions you can use when starting to consider this step at a high level. As with any strategic decision, there are a lot of factors to weigh, and you should consult with your legal counsel to determine the feasibility of a merger or acquisition arrangement.
Potential benefits:
- Expansion into a new geographic area or market
- Consolidation of redundant or under-performing programs
- Access to additional resources (research, athletics, student life, etc.)
- Stability for students, faculty, and staff
- Streamlining of back-office functions (HR, facilities, food services, finance, financial aid, etc.)
Potential challenges:
- Limitations due to federal and state regulations
- Inadequate time to go through the merger and acquisition process due to financial constraints
- Difficulty of successfully completing a merger or acquisition from a legal standpoint
- Loss of unique brand identity or recognition
- Misalignment of culture or beliefs with the other institution
- Impact on students, faculty, and staff who were not anticipating a change
- Potential impact on alumni and donors
Finding a Potential Merger or Acquisition Partner
With the limited number of higher education institution mergers and acquisitions occurring each year, there is no tried-and-true roadmap to follow. However, the importance of understanding and finding the right potential partner institution cannot be understated.
This does not mean that you should try to find another institution that is just like yours, except in a better financial position. Many private higher education institutions are members of associations based on geographic region or denomination affiliation. These associations are a good place to float ideas and get insight into other institutions that may be in a similar situation or interested in expanding their reach through a merger or acquisition.
Or perhaps a more creative solution would be feasible. You could consider pursuing a partnership with an institution affiliated with a different denomination, or a merger between a private and a public institution. You could also look for potential partners with value-added services that your institution does not offer or, conversely, that are lacking in areas where your institution is strong.
Planning for Success
No matter which side of the merger or acquisition you are on, it is crucial to have pre-established guidelines and a reasonable plan. In addition to this template for successful nonprofit mergers and acquisitions, here are a few tips:
- Put together a list of “non-negotiables,” or aspects of the other institution that must or must not be the case before any next steps are taken.
- Collect information about potential partner institutions and have thorough conversations with internal and external stakeholders.
- Allow ample lead time for the various accrediting and regulatory bodies to review and work through due diligence.
- Be vigilant about following regulations throughout the process and promptly providing any requested information.
- Communicate with students, faculty, and staff as soon as is appropriate to quell any concerns.
Please contact us if you would like to learn more about how CapinCrouse can support your institution through the merger and acquisition process.
Additional Resources:
When Your Institution is Facing an Uncertain Future: Revenue Enhancement Considerations
A Template for Successful Nonprofit Mergers and Acquisitions
Authors: Dana S. Stuart, Senior Manager – Consulting and Christopher M. DuKate, Partner