Over the past decade in the U.S., higher education institutions have experienced a drastic drop in enrollment, a trend that became even more pronounced during the pandemic. Increasing tuition fees and mounting student loan costs are major factors in students’ decisions to skip higher education or opt for vocational training. As a result, many higher education institutions are turning to mergers and acquisitions (M&As) to mitigate the challenges of declining enrollment.
The Current State of Higher Education and the Rise of M&A
From spring 2011 to spring 2022, college enrollments in the U.S. saw a sharp decline, dropping from 19.6 million to 16.2 million, with the highest numbers recorded in 2010. This staggering drop has left many public universities and small, private institutions struggling to improve their financial situation.
To achieve that goal, there’s been a surge in merger activities between colleges, especially those with student bodies under 5,000. For context, the years between 2000 and 2018, there were a total of 78 mergers. However, this number rose drastically in the four-year period of 2018-2022, with a count of 95 mergers.
These mergers, typically involving neighboring colleges with fewer than 5,000 students, allow institutions to spread costs over a larger student body and bolster their financial stability. At the same time, a merger or acquisition expands the physical footprint of campuses, enabling the merged institutions to offer more attractive programs and resources. As a result, they become more competitive with online options.
The rise in M&A activity in higher education serves as both a response to and a strategic approach for navigating the challenges presented by declining enrollment and the rise of alternative educational pathways.
The Role of Technology in M&A Transitions
One cannot underestimate technology’s importance in M&A transactions in the higher education sector. Seamless IT integration often determines the success of the merger. Centralized data systems, which facilitate universal accessibility, are pivotal for streamlined operations, including enrollment and financial tracking. A thoughtful IT strategy from the outset can help assess system compatibility, streamline data migration, and plan for future scalability.
Engaging an IT advisor early in the process can enhance the ROI of the merger. An advisor brings specialized knowledge in tech integrations and can anticipate and address potential roadblocks, offering proactive solutions. By guiding the strategy and implementation process, an IT advisor can augment the ROI of the merger by optimizing the utility of the centralized data systems and ensuring a seamless technological transition.
While finances and educational strategies are key pillars, a well-planned, expert-driven IT strategy serves as the linchpin that holds these elements together, paving the way for a successful merger.
The Role of IT Strategy in Successful M&A Integration
Technology considerations should range from student communications to operational support, and M&A integration planning must address every aspect to reduce student and administration disruption and merger costs. Before the merger begins, it’s imperative for all parties to streamline IT processes and develop a flexible, adaptive, and inclusive IT strategy for both during and post-merger. A clear blueprint is essential for integrating technology and operations.
For a successful M&A integration, IT strategy should prioritize the following:
- Assisting in the creation of a data governance plan to purge irrelevant or redundant data with clear retention policies going forward.
- Working with leadership to determine which technologies can help streamline or automate processes during M&A.
- Post-merger monitoring and maintenance to address any lingering issues, help improve efficiencies, and support new growth.
If institutions have exercised due diligence with IT strategy, the M&A is more likely to remain within expected costs. Post-merger monitoring and maintenance will also likely be a smooth and efficient process.
Looking Ahead: The Future of M&A in Higher Education
Recent trends show a slowdown or a gentle reversal in dropping enrollment. However, the U.S. birthrate has been declining for years, hitting a record low in 2020. Competition for a smaller pool of potential students and an increased need to craft more attractive offerings for international students will drive M&A for years to come.A powerful technology strategy is a key part of a successful transaction. If your institution is working on a merger or acquisition strategy, don’t risk failure because of IT disconnects. Get expert guidance from Hartman Executive Advisors and craft a plan for your institution’s long-term health and success.