In 1735, Benjamin Franklin addressed his Philadelphia neighbors in an anonymous letter to his Pennsylvania newspaper. Franklin famously mentioned in this writing that “an ounce of prevention is worth a pound of cure,” referring to the importance of good planning, preparation, and the right tools for fighting fires in the city.
Did this admonition yield positive results? The historic record shows that Philadelphia never suffered a catastrophic fire compared to other larger cities of that era. The great fires of London (1666), Charleston (1740), and Chicago (1871) are all instances where additional planning and preparation could have made a massive difference. Many credit Franklin’s wisdom in preparation and planning for saving Philadelphia from a similar threat during those early years.
Fast forward nearly 300 years: several of these lessons apply to modern life and specifically relate to protecting higher education institutions from economic and demographic decline, along with dozens of critical threats these entities currently face.
One of the more complex areas of institutional strategy is college mergers and acquisitions, typically aimed at preventing closure or existential decline. Merger discussions are initiated in many places, with many people, and at many times. The deeper and more significant the discussions get, the more important it is to remember Franklin’s wisdom to plan and prepare with an “ounce of prevention,” which may help higher education institutions succeed at this complex task.
Planning can be the difference between a successful and a failed merger. In too many cases, poorly planned and executed merger transactions have led to problems, ranging from significant hurdles to institutional closure.
Preventive Measures for Higher Ed Institutions Considering College Mergers
An ounce of prevention for a college merger may have these common characteristics:
- Ample time. A merger or acquisition strategy may not be ideal when financial circumstances dictate that asset infusion is needed in the short term. Experts agree that the time needed for a successful merger is not measured in months, but in years.
If a college is within a three-year window, it may be better to not consider merger or acquisition transactions. Instead, it might be time to choose a path toward a dignified closure. This would include taking care of the faculty, staff, students, and those who have made investments of time and treasure in the institution.
- The right people at the table. Having the right people at the table includes accumulating the relevant and knowledgeable skill sets to:
- Conduct a market and competitive landscape analysis.
- Identify the desired characteristics of an ideal partner, keeping in mind that not all opportunities are strategic.
- Clarify roles and responsibilities, including outside advisors for IT integration, legal, regulatory, accreditation, facilities, or financial reporting.
- The right “end in mind.” As you define the “why” for a merger transaction, the following topics should be considered:
- The market and mission focus is on taking advantage of existing institutional strengths.
- Diversification of programs and revenue streams, including new programs built upon existing institutional strengths and strong markets.
- Operational synergies and mission fit/cultural alignment.
While each of the above characteristics is important, one that stands out for successful mergers is the right end in mind, pertaining to mission fit and cultural alignment, as outlined below.
Mission Fit
At the end of the merger process, a singular mission that inspires and is embraced by all involved should be clearly identified. This element should maintain sufficiently high levels of motivation among both parties, which may allow the parties to push through the inevitable rough patches of the merger process.
As you begin the work of mission fit evaluation, consider the following:
- Do the merger candidates’ stated purposes (missions) synchronize (are they compatible)?
- Beyond compatibility, do the two institutional missions create opportunities for enhanced mission attainment for both institutions?
Cultural Alignment
We’ve identified three key areas of cultural alignment that help inform a harmonious match for college mergers.
- Vision. Can you articulate the specific and unique purpose your institution exists to achieve? Is it clear? Ask these questions and more below to determine the level of strength and clarity for your vision:
- Do the leaders of your constituencies (faculty, staff, students, administrators, donors, and parents) know and understand how their behaviors contribute to achieving the vision or detract from it?
- Are there accountability markers and checks along the way that indicate how concentrated or diluted the institutional vision is?
- Is vision alignment a discussion topic when making decisions?
- Values. Values determine “how” you execute your vision. In thinking through and comparing the values of the institutions, ask:
- Do the values held by both organizations truly reflect who they are?
- Are these values reflected in actions and choices over time?
- Are values prioritized when making decisions?
- Common tools to gauge values include checklists, surveys, or questionnaires.
- Practices. These detailed playbooks include the practical approach used to execute vision and measure values.
Finding Your Partner
Northwestern University’s Kellogg School of Management published a research report on nonprofit organization mergers in 2016. According to the report, in 80% of the merger cases, a prior relationship or collaboration existed between the merged organizations. In addition, the acquired organization initiated the merger discussion in 60% of the merger cases.1
The starting point for a college merger might be as simple as considering institutions that already share strong connections and relationships. This can sometimes be driven by geography, professional relationships, or leader affiliations.
Another avenue to begin this process is considering professional assistance to match your institution with another. Services such as the Forvis Mazars Higher Education Strategic Partnership Hub can help you navigate this process.
The Journey Ahead
Finding the right partner takes a solid plan, and planning well takes time. However, applying an ounce of prevention (and taking into account the time, attention to detail, and preparedness needed) for a successful college merger is well worth the cure. Proper preparation and the right tools for a merger can make the difference between a failed or flourishing process.
For more information on how our higher ed services can help your institution, please reach out to a professional at Forvis Mazars.
- 1“Mergers as a Strategy for Success – 2016 Report,” Metropolitan Chicago Nonprofit Merger Research Project, chicagonpmergerstudy.org, 2016.