Merger Viability
In our last issue of MMC Insights, I made the point that, although there is still some uncertainty about the future of higher-education, there IS business to be had! By that I mean there is available enrollment growth and an opportunity for increased profitability. In that article I made the point that institutions that prepare as they should will inherit students from institutions that don’t.
Since then, it has been my privilege to work with two wonderful private Christian colleges who were closely evaluating a potential merger. One of the colleges, which I will refer to as the Transferring Institution, has been struggling the past few years with a substantial decline in enrollment. They were running out of operating capital and were hopeful that the other college, which I will refer to as the Consolidating Institution, who has been doing well, would take them over and make their college one of the Consolidating Institution’s satellite campuses. Everything looked positive in terms of culture, values, doctrinal beliefs, program-alignment, shared services, debt-relief, etc. The only questions were:
Could enrollment for the Transferring Institution be reversed?
Could the Transferring Institution’s enrollment grow larger enough to be financially viable?
What would it take and how long would it take?
That is where we (MMC) came in. Through our Institution-Wide Enrollment Assessment and an associated Regional Market Study, we were able to answer those questions. Through our regular briefings and final report, we were able to convey what led to the Transferring Institution’s decline in enrollment, and make specific recommendations of how it could be quickly reversed. The opportunity was very optimistic and, in essence, all systems were GO!
The interesting thing is that when the Consolidating Institution shared our report with the Transferring Institution, the Transferring Institution was so encouraged that they started to re-think whether they really needed to have the Consolidating Institution take them over, or just establish a close alliance with them for an expanded program offering. Time will tell. We have since proposed that we develop a market plan based on our findings to help the Transferring Institution ensure their success. However, this experience sparked a very important take-away:
When a college or university is considering a merger or take-over, the first thing that should happen is an Institution-Wide Enrollment Assessment, such as we did for these two colleges. It facilitates two things:
The Transferring Institution may discover that they don’t need to merge or be taken over; that they are able to reverse their situation with the right advice and the right market strategy.
If, after completing the assessement, the Transferring Institution still wants to pursue a merger or take-over, they will be able to provide the Consolidating Institution with some assurance that the financials can be reversed – not just through shared resources, but also through enrollment growth.
It is our belief that many mergers, acquisitions, or purely take-over opportunities will surface in the near future. Indeed many are already surfacing. For some institutions (both Transferring Institutions and Consolidating Institutions), mergers will likely be a vital strategy for long-term sustainability in the new economy.
If you are considering some type of potential merger, why not give us a call to see how we could help validate the financial opportunity or lack thereof? That is our specialty and we would be honored to work with you this way. And now, through our innovative Subscription-Consulting pricing model, we are able to provide you with very attractive discounted pricing.
It costs nothing to talk! You can reach us at mmc@mikemoroney.com or 720-233-3227.