When Should You Consider a Merger, Acquisition, or Partnership?

Right now is not too soon. Higher education is consolidating. Institutions are closing, the number of postsecondary schools is declining, and larger colleges and universities are gaining scale. Against this backdrop, boards should consider mergers, acquisitions, and partnerships as part of regular strategic and contingency planning—not simply as a response to financial distress.

For institutions facing financial pressure, waiting too long can narrow options and weaken negotiating leverage. For financially healthy institutions, exploring partnerships or acquisitions from a position of strength can create opportunities to expand reach, add capabilities, and strengthen the mission.

When Should Your Board Be Concerned?

If your institution is experiencing several of these indicators, the board should understand its financial runway and begin considering strategic alternatives before circumstances dictate the available choices.

Declining Enrollment

Persistent enrollment declines reduce tuition revenue and can quickly put pressure on an institution’s operating model. Boards should look beyond year-to-year fluctuations and understand whether enrollment trends point to a longer-term structural challenge.

Chronic Deficits and Narrowing Margins

Recurring operating deficits or steadily narrowing margins suggest that revenues and expenses are moving in the wrong direction. Cost reductions may provide temporary relief, but repeated deficits can quickly limit an institution’s strategic choices.

Insufficient Cash and Shrinking Reserves

An institution can have significant assets and still face an immediate liquidity problem. Declining cash flow and shrinking reserves reduce the time leaders have to address problems—and can make it harder to negotiate a partnership from a position of strength.

Growing Debt and Deferred Maintenance

Rising debt and deferred maintenance can signal that an institution is borrowing from its future to sustain current operations. As these obligations accumulate, they can also make the institution less attractive to potential partners.

Low or Declining Unrestricted Endowment

A low or declining unrestricted endowment leaves fewer resources available to absorb financial pressure, invest in growth, or respond to unexpected challenges. Boards should understand not only the size of the endowment, but how much is actually available to support institutional needs.

High Employee Turnover

Persistent turnover, particularly among senior leaders, faculty, or other critical employees, can signal deeper organizational challenges. It can also make an already difficult turnaround harder by weakening institutional capacity at the moment it is needed most.

Strategic Actions Boards Should Consider

A merger is not the only option, and financial distress is not the only reason to consider one. Boards should examine both defensive strategies that preserve institutional options and opportunistic strategies that create new avenues for growth.

Institutions Facing Financial Pressure

Understand your financial runway. Determine how long the institution can continue operating under realistic enrollment, revenue, expense, and liquidity assumptions.

Establish decision points. Identify the financial indicators that would trigger consideration of a partnership, affiliation, acquisition, merger, or other significant change.

Explore options early. Begin evaluating potential partners before financial conditions become acute. Waiting until the 11th hour can significantly weaken your institution’s bargaining position.

Understand what you bring to a partnership. Identify the programs, assets, geography, brand, students, capabilities, or other strengths that could create value for another institution.

Keep multiple paths open. Considering a merger, acquisition, or partnership does not commit the institution to one. It gives the board a clearer understanding of its options.

Financially Strong Institutions

Look for strategic opportunities. Partnerships and acquisitions can provide access to new programs, students, markets, capabilities, facilities, or geographic reach.

Define the right partner before you start looking. Identify what you need a partner to contribute and establish criteria for mission, culture, academic, financial, and market fit. This helps your institution pursue its strategy rather than allowing an available opportunity to determine it.

Use your position of strength. Financially healthy institutions have more choices, greater negotiating leverage, and more flexibility to pursue opportunities that advance their mission.

See what this can look like in practice. A financially strong university sought to expand into the Southeast. AGB helped define its ideal partner and conduct a targeted search, leading to an acquisition within months.
Read the case study →

AGB experts can help you tackle these challenges.

AGB can help your board and senior leadership understand your institution’s strategic and financial position, evaluate merger, acquisition, and partnership opportunities, and determine when—and whether—to act. Our experienced consultants help institutions assess options, identify potential partners, align boards and leadership teams, and move from analysis to action.

Let’s start the conversation.