There is no shortage of conversations about consolidation in higher education. Industry leaders have shifted from talking about mergers or acquisitions (M&A) as theoretical possibilities to predicting the number of college closures and mergers over the next several years. Forvis Mazars has written about this extensively over the last 12 months, including the questions that institutional leaders should ask and what we’ve learned from recent mergers. We have also spoken about mergers at national and regional conferences, including the Council of Independent Colleges Presidents Institute and NACUBO.
Through our industry presence and our work with clients, we have seen an increase in interest in M&A at the Board level. Leadership teams and Boards alike are interested in pursuing strategic partnerships because they see an opportunity for growth and they want to understand how they can operate at scale to deliver their mission. We have also participated in thoughtful conversations about the range of possibilities that comprise strategic partnerships. Sometimes, these are true mergers. But many leaders are actively pursuing strategic partnerships that will allow them to share critical functions across institutions.
The concept of shared services is not new. There are a number of well-known consortia in the industry, including Claremont Colleges and the Boston Consortium. There are also a number of true systems of private institutions, like The Community Solution, that operate several different institutions, sometimes in several states and serving different populations. Those success stories are driving conversations on campuses, with presidents collaborating across institutions to identify their best opportunities to establish new partnerships.
Shared Services Opportunities
Based on the higher education operating model, most of the opportunities for shared services fall into one of these broad buckets:
- “Big” information technology (IT) – pursuing joint contracts for things like your learning management system or your enterprise resource planning (ERP) system can incentivize vendors
- Benefits – going to providers as a group can help manage costs and increase return
- Procurement and finance – most of these offices are doing very similar things for different institutions, presenting an opportunity to consolidate those efforts and deliver them at scale
- Instruction and curricular augmentation – offering your courses to students in other institutions provides benefits on the expense and revenue side
Shared Services Considerations
These options are attractive and, to an extent, have worked for existing consortia and systems around the country. However, there are some important considerations to keep front and center if you’re in active conversations about starting a new strategic partnership focused on shared services:
- The cost of migrating to new technology is often extensive and implementations take several years. If your institution is trying to identify cost-savings, recognize that it may be several years before those savings are realized and that there will be a substantial up-front investment.
- The structure of the partnership, especially one involving more than two institutions is important. Will there be a parent organization? How long will it take to legally establish that organization and what will the cost be? Who will lead it? How much will each institution contribute to and take from the new organization? What will be the process for taking on new partners?
- These models tend to work because they require each institution to have fewer staff, and sometimes, leadership positions (think about a VP of Finance) are redundant across different institutions in the partnership. Institutions considering these agreements should consider the timing and implications of any reduction in their workforce that will result from the partnership, including sunsetting Cabinet-level positions.
- There are very real governance implications to these partnerships. If you’re sharing curricular or faculty resources, which institution’s governance model or faculty handbook will apply and when? How will disputes or faculty separations be handled? Which student evaluation or grading philosophy will be implemented?
- Even when beneficial, partnerships can expose institutions to risk. It is important to consider what sorts of infrastructure will be needed to manage HR functions in multiple states, or standard operating procedures for emergency management across multiple institutions, for instance. There’s also a potential for reputational risks if challenges experienced by different institutions in a system or consortium are conflated in the media.
How Forvis Mazars Can Help
If your institution is looking into a strategic partnership, our team is here to assist every step of the way. At Forvis Mazars, we work to help institutions differentiate between mergers that advance a clear strategic agenda and those that are attractive but shortsighted. If you are interested in learning more about our Strategic Partnership Hub, reach out to our team today to schedule a complimentary visioning conversation.