Trends in College and University Consolidation: Closures, Mergers & Takeovers

Trends in College and University Consolidation: Closures, Mergers & Takeovers
Imed Bouchrika, Phd by Imed Bouchrika, Phd
Chief Data Scientist & Head of Content

Colleges and universities have been battling issues that threaten their survival. Even some of the oldest colleges in the US are not spared. Among these threats are national and international competitions, changing student demographics, and the need to keep up with new technology demands in higher education institutions. To cope with these issues, many institutions have resorted to consolidations and mergers as strategies to ensure their survival.

This article will explore various factors that cause colleges and universities to merge. It will touch on various issues and challenges that institutions must address during the consolidation process. Additionally, it will underline trends in college and university consolidation, including a case study of a merger.

Trends in College and University Consolidation: Table of Contents

  1. Why do colleges and universities merge?
  2. What happens when colleges merge?
  3. Trends in College and University Consolidation
  4. Challenges of College and University Consolidation
  5. Augusta University – A Case Study

Why do colleges and universities merge?

Mergers are quite common in virtually all types of industries. The union of various entities ensures their growth, especially in cases of acquisitions and expansions. After doing a needs analysis, organizations might decide that merging with other institutions could increase their chances of long-term survival.

Just like any institution, colleges and universities require revenues through enrollments, grants, subsidies, government support, and other channels. Operations such as research projects, student services, and other academic endeavors require significant funds that tuition fees alone cannot support.

The current socio-political and economic situation makes it challenging for these institutions to find consistent revenue sources. Furthermore, they have existing revenue struggles to keep up with increasing operational expenditures. As such, mergers have become a solution for many of these colleges.

Sources: National Center for Education Statistics, 2019

But, what are the specific disruptors that push higher education administrators to consider consolidation?

These can be categorized into two: disruptors to revenues and disruptors to costs (Azziz et al., 2019).

Disruptors to Revenues

Disruptors to revenues refer to various issues that prevent colleges from obtaining sustainable revenue streams. Without these sources of funds, core operations and services are affected. Here are some of the most common disruptors to revenues:

  • Evolving student expectations and demographics
  • The decreasing number of high school graduates in the area
  • Unpredictable employment market
  • Significant competition against online and global providers
  • Increasing interest in alternatives to a traditional education system
  • Competition for governmental funding such as healthcare and social services
  • Decreasing local and state support
  • Public resistance to tuition fee hikes
  • Competition against philanthropic initiatives
  • Population’s inability to support student debt

Disruptors to Costs

Disruptors to costs indicate the challenges that cause university expenditures to increase. Here are some examples:

  • Higher employee legacy costs
  • The pressure to produce more tangible outcomes such as research outputs
  • Governmental and public oversight and regulation, especially in monitoring and compliance costs
  • The pressure to offer new services and technologies
  • Increasing market prices of services and goods

What happens when colleges merge?

College and university mergers involve complex processes and multiple stages. Depending on the institutions’ size and goals, consolidation may be as simple as a larger university absorbing a smaller college. It may also take several rounds of negotiations, which is common in the union of multiple institutions. However, these processes can be summarized into five phases:

Phase 1: Exploration and Considerations

The first phase involves decisions from the administration and governing boards. It includes strategic assessment, evaluation of risks and benefits, and development of the consolidation timeline. Furthermore, these decision-makers will create communication channels and guidelines for the stakeholders and potential partners. Naturally, this is when the college chooses its merger partner and the elements of the negotiations. This may take a few months to a few years.

Phase 2: Premerger

At this stage, the governing boards will select key personnel who will lead the merger process. Then, the team will formulate the vision that will drive the direction of the merger. At the same time, they will outline the resources required for the next steps.

Phase 3: Merger

The phase is short compared to the other phases, but it is definitely the busiest among the five. The union of the institutions is cemented through various regulatory bodies. Important groups are involved in this step, such as the governing boards of the merging colleges, accreditors, and representatives from the government, such as the U.S. Department of Education. It includes drafting the unified governance plan, along with the resulting administrative body. Furthermore, finances, student enrollment, academic services, and other critical aspects of the new institution are discussed and negotiated at this stage.

Phase 4: Early Postmerger

The Early Postmerger stage includes the first two to three years after the merger. The execution of the unification plans happens at this phase. This includes selecting the name and brand, building the oversight and administrative services, and establishing the new college or university’s leadership and governance structure. Complex merger structures may take more time in this stage to solidify its foundations. Some may take up to five years to establish the brand and the governing body of the new institution.

Phase 5: Late Postmerger

Immediately after the fourth phase is the late postmerger stage, which continues up to a decade. Experts in higher education say that it takes about ten years before a merger can be considered successful. During these years, the new institution and its leaders will establish and handle opportunities and issues emerging from the new university identity, campus culture, and synergy of the college as a whole. It is also their responsibility to leverage these opportunities for education and research growth, including the development of new services and programs. Along with these tasks, the college will also balance tradition and innovation.

The number of college and university mergers across the United States have been increasing since the Great Recession. The echoes from those years have been affecting small institutions that were already facing significant financial challenges (Farmer, 2019). Since 2016, around 60 institutions have announced plans of consolidation or have already merged with others (Busta, 2018).

Source: Higher Ed Dive, 2020

Several trends have been identified due to numerous college and university closures, consolidations, and mergers. Here are a few:

Smaller Institutions Were the First To Go

Among the institutions that have closed or merged, many are understandably smaller colleges. Student attendance and enrollment have been declining in these colleges since 2010. Those with the biggest declines are schools with fewer than 1,000 students. Furthermore, their enrollment has fallen by as much as 5% compared to previous years, which is primarily due to lower birth rates in the localities (Farmer, 2019).

More than 700 colleges are currently identified as small and at risk, which may result in more mergers in the coming years (Reynolds et al., 2016). Along with the decreasing state funding, increasing tuition fees, and other financial issues, consolidation may be the next logical step to avoid total closure.

Long Consolidation Process

College mergers are not without controversies. After all, combining public educational institutions requires significant political efforts. There are numerous stakeholders, such as students, parents, faculty members, the state, the local government, and more. As such, handling the entire process is tricky at best. That is why many institutions are taking the long game to ensure success.

For example, leaders in the merger of 13 two-year campuses into the University of Wisconsin System say that the transition process may take longer than the allotted two years (Farmer, 2019). The transfer of two-year academic programs into four-year institutions alone will take a few years to solidify. However, the governing boards are already seeing strong foundations through new collaborations and programs.

This approach seems promising, as exemplified by the University System of Georgia (Farmer, 2019). It has consolidated nine smaller colleges in the past eight years to improve overall service and student outcomes. Consequently, Georgia Perimeter College, which merged with Georgia State University in 2016, improved its graduation rate from 6.5% in 2014 to 15% in 2018.

Saving a Campus to Save Money

State governments often consider consolidation to save campuses that are in trouble. Additionally, it is an opportunity to save money in the sense that the operational costs of one consolidated system are lower than those of several independent colleges.

For instance, the merger of the smaller University of Maine at Machias with the flagship University of Maine at Orono eliminated many back-office functions and leadership positions (Gardner, 2020). The move allowed the state to save operational costs and staff wages. While enrollment is continuously decreasing in Machias, locals still have access to a four-year college with a closer connection to a research university.

Challenges of College and University Consolidation

Mergers are complicated, which means there are numerous challenges that the institutions must deal with during the process. Each consolidation experiences unique issues and hurdles. However, most, if not all, will eventually face the following:

Miscommunication Between the Merger Leaders and Stakeholder

Significant changes such as mergers are never easy, especially for students and faculty members. During consolidation, a common issue is the misunderstanding between the affected stakeholders and the leaders of the merger process. This usually stems from miscommunication issues, lack of understanding, and failure to collaborate.

For example, professors from the 12 campuses under Connecticut’s Students First consolidation plan have raised multiple issues with the board. The merger’s goal is to create a general-education curriculum and provide guided academic pathways to improve student retention rates. However, faculty members are concerned about the one-size-fits-all approach, which may not benefit students in each community. They also mentioned that they had received mixed messages from the administration. Initially, the core motivation for the consolidation was financial concerns. The sudden change in vision raises red flags, according to the professors (Gardner, 2020).

Continuous Decline in Enrollments

Many consolidations were initiated to solve the problem of declining enrollment rates. However, the changing demographics of college students are still causing a decrease in attendance. As mentioned previously, the significant decline in local birth rates has reduced the number of teens entering college. Similarly, more than half of colleges in the U.S. say that there are fewer students to go around. The number of foreign students is also declining.

Furthermore, a college student’s typical profile has changed in the past decade or so (DMI, 2019).

Source: Lumina Foundation, 2020

In fact, 20% of college students today are over 30. As such, many are already working and even raising a family. Thus, they are motivated to find alternative ways to attend college. For instance, 35% of students are part-time, which means they are only enrolled in a couple of courses. Additionally, more than 25% are choosing online courses instead of the traditional classroom set-up.

Consolidated colleges need to immediately redirect their programs toward the changing demands of students. For example, they can offer online classes and degree programs. However, limited budget and revenue prevent some colleges from implementing additional services as they are already facing financial issues.

Augusta University – A Case Study

College and university consolidation takes years before solid foundations can be established. Throughout the entire process of unifying two or more institutions, administrators should be able to take advantage of opportunities while minimizing risks.

Back in 2013, Georgia Health Sciences University and Augusta State University consolidated into Georgia Regents University, now known as Augusta University. The union aimed to create a student-centered research university as well as an academic health center. It will also offer a wide range of academic programs and services, from learning assistance to postdoctoral studies (Azziz, 2020).

During its consolidation processes, the new university identified opportunities and benefits early on. Some of the most notable ones are:

  • Significant reduction of costs in administrative processes – In its first week, Augusta University reduced administration costs by as much as 3% compared to the previous year.
  • Better talent recruitment – The resulting larger institution recruited nationally recognized talents, faculty members, and leaders with specific expertise and specializations.
  • Efficiency and savings – It eliminated duplicate programs, used facilities more efficiently, and saved on supplies through large, bulk orders.
  • Greater academic value – Old programs were revamped, and new ones were created through the combination of resources and talents. The consolidation also provided more opportunities for faculty development.
  • Better reach and footprint – The larger university was able to use the 700 training sites from the former Georgia Health Sciences for non-health-science courses. Additionally, these training centers are utilized in the recruitment of new undergraduate students across the state.
  • Increased competitiveness – By combining the previously-mentioned benefits with the larger student body, the university is more competitive, especially in supporting existing and new projects such as the athletics program. The larger student population also provided a relatively stable revenue stream. Furthermore, any increase in tuition fees due to declining state support can be distributed across a larger student body.

Even with a great start to the consolidation process, Augusta University is not without any issues. The new university experienced many challenges, such as:

  • Risk of marginalizing the smaller community being absorbed by the larger institution.
  • Little to no change within the dominant partner’s faculty and staff resulted in the loss of opportunities for reevaluation and improvement.
  • Branding and identity issues may affect the recruitment of new students.
  • Risk of creating more complex processes which can lead to inefficiency and higher expenditure.
  • Fewer opportunities to eliminate duplications as Augusta State University and Georgia Health Sciences University are dissimilar from each other. The former was oriented towards liberal arts, and the latter was focused on health and biomedical sciences.

Nowadays, Augusta University is a thriving institution that offers numerous programs in various domains such as arts and humanities computing, education, health science, and more. It is also home to streamlined undergraduate and graduate programs. Additionally, it offers numerous research programs through its laboratories and centers.

Future of Colleges and Universities

Colleges and universities are committed to providing academic and career opportunities to students, faculty members, and other staff. However, just like in any industry, higher education institutions are reeling from the effects of the economic upheavals in recent years. Coupled with lower state funds, higher operational expenditures, and pressure to lower tuition fees, colleges are in a precarious situation.

These institutions should consider consolidation not only to avoid closure but, more importantly, ensure the continuity of their educational programs and academic tradition. While mergers are complex and challenging, the potential benefits may be worth it. The resulting union will help in the survival of smaller campuses and provide opportunities for growth.

Furthermore, mergers take a long time, with some consolidations taking up to 10 years before seeing any significant results. However, time is necessary to hear the voices of the stakeholders and balance their varying interests and demands.

 

References: 

  1. Azziz, R. (2020, July 23). What happens when 2 colleges become one. The Chronicle of Higher Education.
  2. Azziz, R., Hentschke, G. C., Jacobs, L. A., & Jacobs, B. C. (2019). Strategic Mergers in Higher Education. Baltimore: Johns Hopkins University Press.
  3. Busta, H. (2018, October 18). How many colleges and universities have closed since 2016? Higher Ed Drive.
  4. DMI (2019, November 15). Do mergers hold the key to higher education’s future? Digital Marketing Institute.
  5. Farmer, L. (2019, October 02). ‘This is the bust’: Colleges tackle the challenge of regional consolidation. Higher Ed Drive.
  6. Gardner, L. (2020, July 31). More states are looking at consolidating their public colleges. Does it work? The Chronicle of Higher Education.
  7. Reynolds, S., Ladd, H., Greenberg, J., Lundy, K., Selingo, J. J., Lytle, R., & Gould, P. (2016). Strength in Numbers: Strategies for Collaborating in a New Era for Higher Education. London, U.K.: EY-Parthenon.

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