Growth and Transformation

A New Era for Mergers

By Jeff A. Weiss    //    Volume 26,  Number 1   //    January/February 2018

This article is part of the Mergers and Affiliations Toolkit, which includes a host of resources that enable board members to learn, evaluate options, and develop a strategy that makes sense.

Mergers in higher education were once considered last-ditch efforts to survive, often involving a simple acquisition of assets resulting in the acquired college disappearing into the purchasing institution. Now, however, a growing number of institutions are considering mergers as a true strategic choice for effecting growth, innovation, and financial sustainability at a time of ever-increasing challenges in the higher education sector. Rather than a simple acquisition of assets, today’s mergers entail a far more complex combination where capabilities and assets—along with challenges and liabilities—are brought together to form something new. Success depends on true collaboration and integration.

That can be easier said than done. The success of these types of mergers requires a disciplined approach by the university president and leadership team, with equal rigor applied to the university board’s oversight role throughout the exploratory, negotiation, and integration processes. The board should continually test and expand senior management’s thinking, asking critical questions at each step along the way. This is particularly important during the exploratory phase where the reason for potentially merging is clarified, other forms of partnership are considered, and potential partners are identified, assessed, and engaged.

During this phase, the board should be asking five key questions of senior management:

  1. What are the capability gaps we are trying to fill?
  2. Is a merger the best structure for filling those gaps?
  3. How well do these potential partners fit with us and our needs?
  4. What is the mutual value proposition for this potential merger?
  5. How do we plan to measure success over time?


Mergers are a means to an end, not an end in and of themselves. Falling in love with the idea of merging and forgetting the purposes for potentially doing so is, unfortunately, not uncommon. Far too often, organizations chase the biggest or most prestigious potential partner. Or, in the alternative, they pursue the one they know best and is seemingly the most expedient choice. This is a recipe for disaster.

Before considering any potential partner, it is critical that senior management in conjunction with the board clearly define the purposes for a potential merger—in other words, what they are specifically trying to achieve and believe they cannot achieve on their own. This, however, is just a first step. Translating this more specifically into the capability gaps they are seeking to fill is the next one. If they are aiming to improve enrollment, for example, are they searching for a partner that has better technology, analytics, marketing, recruiting, program types, or student support services? If they are aiming to develop new sources of revenue, are they looking for a partner that has better fundraising, alumni relations, grant writing, or entrepreneurial capabilities, just to name a few? Before moving ahead, board members should ask the senior team to discuss the reasons for a potential merger, and how this translates into specific goals, necessary capabilities to achieve those goals, and the current and emerging gaps they believe they face.

The board should not only test these answers and help the team refine them, but also align around a set of answers to these questions.


Based on the definition of the gaps, senior management should then assess and discuss with the board the best structure for filling these gaps. In simple form, there are three choices, each with advantages for particular needs, and each with attendant risks:

  1. Build the capabilities internally. The simplest choice—if it can be accomplished quickly and the financial resources, people, and expertise are available—is to develop the capabilities internally.
  2. Establish partnerships. If the bulk of the desired capabilities are ones that may not be needed for the long-term, may be based on needs that change rapidly, or are ones where the risk-reward ratio favors borrowing rather than owning them over time, a partnership—or even a set of partnerships—may make more sense. Making partnerships really work, of course, requires a willingness to share risk and reward, deep collaboration and active relationship management skill, and patience. It also runs the risk of creating dependencies on another organization that, over time, might become a competitor or enter into another partnership with an existing competitor.
  3. Enter into a merger with another university that readily has the capabilities. If gaining and having control over the capabilities is critical, if owning them is required for long-term success and is less risky and expensive than building them internally, if there is a willingness to give up autonomy, and if one can clearly forecast the added power and value of permanently combining one’s capabilities with another organization, a merger might be in order.

Given the strategic nature of this choice, the board must engage in this discussion, with its appropriate subcommittees considering potential financial implications, legal complexity, and the academic and operational opportunities and limitations of each path.


Assuming the choice is to explore a merger, the senior team should begin targeting potential partners who have the desired capabilities. Once they have developed that list, the board should expect senior management to provide three main analyses to narrow the playing field. The first goes right to the core of how well potential partners might be able to fill the need capability gap(s) defined earlier in the process. For each potential partner identified, senior management should be able to answer the following:

  • Does the potential partner have the desired capabilities?
  • How strong are these capabilities? Are they sustainable? Are they likely to strengthen over time?
  • Will we be able to gain access to these capabilities? To what degree? Who else is competing for use of these capabilities?
  • Do we believe the potential partner likewise will see advantages in combining its capabilities with ours?
  • What data indicate our answers to the above are true?

Unless the board is satisfied with the answers to these questions, any given potential partner should not be pursued. If the board is satisfied, it then should expect senior management to answer a set of questions that focuses on partner fit. Employing a four-part framework, senior management should be able to present a summary assessment of strategic, financial, operational, and relational fit with each potential partner. While institutions can make this assessment by engaging in some basic due diligence with potential partners, they often can use publicly available information.

Strategic—How well the potential partner’s both stated (what you read) and practiced (what you can see in action) strategy fits with yours is a good place to begin. Is the organization aiming to achieve similar, or at least complementary, objectives to ours; does its mission fit with ours; does it have similar stated and funded goals and priorities; does its core initiatives fit with ours; and so on? The strategies and priorities of each partner do not need to be the same, but it is critical to know how well they are likely to fit together or how effectively coming together might lead to an even more powerful new strategy.

Financial—This is usually the area that gets the most attention, and while it is absolutely critical to assess, it is just one of four equally important areas for inquiry. Understanding the merger partner’s financial health is critical, and examining it on multiple levels is key—enrollment, net tuition revenue, operational expense, capital expense, the endowment, debt and borrowing power, non-tuition-based sources of revenue, etc. Exploring both current health, past trends, and expected future trends in each area is essential, as is asking what all this might mean for both the challenges and opportunities this potential partner will bring to you.

Operational—A careful assessment of operational fit is also critical, as you dig into the strength and workings of the potential partner’s faculty, schools, functions, processes, services, budgeting methods, technologies, linkages among schools and functions, decision-making methods, and governance structures, to name a few of the key areas. Digging beyond the surface to understand the potential partner’s true competencies (what they know how to do really well) and deep “know how” (what it understands really well) is also important. Again, the goal here is not to find a perfect fit, but to understand similarities, complementary capabilities, areas for possible learning and improvement, and others of potential conflict, as you assess the level of both benefit and risk of a combination.

Relational—This is often seen as “soft” and therefore approached in the least serious or disciplined way, and yet it is absolutelyas important as—and sometimes more important than—the other three areas. While this certainly involves developing an understanding of the partner’s values, culture, and ways of both thinking and operating, it also involves taking a deep look at the organization’s experience in partnering with others (through mergers, alliances, and even customer-vendor relationships). Understanding how often the organization has partnered, the purpose for it, its level of success, what was learned over time from these experiences, and how much skill and process was developed in managing these partnerships is allimportantinformation. Encourage senior management to add to their assessment some conversations with the potential partner’s current and past partners. Teasing out what worked, what did not, what they learned about your potential partner, and what they believe the critical success factors were for their partnership with them makes things very real and is almost always very illuminating.

As a board, ask senior management to produce a summary report of the degree of fit in each of these areas—looking not so much at the fit with your institution, but with what you think the institution needs. A summary for each potential partner using a pie chart depiction of a one to four rating of fit in each of the four areas, with a few sentences about particular strengths and areas of concerns, is often an excellent tool for facilitating efficient information sharing and conversation with the board.

The final question of this stage involves assessing the merger from the perspective of the parties you are considering approaching, with the senior management and the board discussing why the potential partners might be interested in merging, what their objectives and concerns might be, and what they might want as part of a deal. While these are questions to ask directly to a short list of potential partners in the next phase of the assessment, it is useful to do some thinking and reality testing beforehand about how each potential partner is likely to view this opportunity. At the very least, this often helps to hone the list of potential partners. But, even more so, this can help the team that will meet with each potential partner to refine how they present the opportunity to each one, arm themselves with well-informed questions, and effectively manage what can turn into “sales pitches” from overly enthusiastic potential partners.

Ideally, strong research, systematic thinking, and engaged conversation between senior management and the board around each of the areas will lead to alignment around a small set of potential partners for exploratory conversations.


Based on the work above, the team that will meet with each of the potential partners on the short list should have three objectives: a) test with each potential partner any areas of uncertainty regarding the capability assessment and four-part framework outlined above; b) work to share and tease out each university’s core underlying objectives for and any key concerns about a possible merger; and c) jointly brainstorm and discuss possible options for what a combination might involve, including its scope, structure, and value proposition. They will need to work hard to focus on objectives (not positions, demands, or solutions) and possibilities (not one particular scope and value proposition, but a range of ideas developed together).

Of course, some of this work with potential counterparts will involve document requests, questionnaires, and interviews, but the focus should be joint exploration. Help the team remember that this is not an RFP process to secure product or services. Instead, they should work side by side with potential counterparts to conduct basic due diligence, explore fit, imagine the possibilities, and explore possible structures and arrangements. Keep the university groups that are talking directly to each other small, and generally reserve meetings between board members until a first choice (or sometimes a first and second choice) selection has been made.

Based on these conversations with potential counterparts, the senior team should be able to report to the board:

  • The possible scope and focus of a merged university—what the institutions would do together, in what areas, and in what ways
  • How the merger would meet key interests of each partner—why, at a level of specific objectives to be achieved by each partner, the merger makes sense
  • One or more compelling joint value propositions for the merged entity— what forms of new value, to whom and in what quantity, the institutions would expect to produce
  • The competitive advantage to be produced—what outside parties are likely to believe makes the merged entity truly distinct
  • The possible structure of the merger— what the merged university might look like and what the key terms of the deal might be

Senior management should bring to the board a range of possible options for answers to these questions for each potential partner, so that they can consider together which are most compelling. This discussion should pressure-test the coherence among the answers (scope, value proposition, structure, etc.). While it may lead to some specific requests for additional work with certain potential partners, in the end, it should yield an informed decision on the primary partner to pursue. Keep in mind that at this point, it is critical to ensure that you do not dismiss your second- and thirdchoice partners, since negotiations with your primary choice will not always work out. It is also important to note that after carefully reviewing the playing field, going it alone or pursuing an alliance rather than a merger may actually be your best choice.


If you do decide to move ahead with the first-choice partner, it is advisable to take one additional step to ensure basic alignment in vision among the board, between the board and the senior team, and between the two universities. One useful way to do this is to engage in a discussion about what success would look like in the short term and in the longer term. Of course, this is a discussion that has already occurred in many other forms above, but asking it directly at this point is important. As you do so, keep in mind that goals are best described through defining both “means metrics” (shorter-term accomplishments that are not the aim of the merger, but are accomplishments that suggest the merger is heading in the right direction) and “ends metrics” (longer-term accomplishments that are the aim of the merger). For example, the latter might involve considerably strengthening or growing a given set of programs or a school, developing new disciplines or areas for deep research, or substantially improving systems and infrastructure. The former might include the number and quality of jointly refined or newly developed courses or research projects over the course of the first couple of years, the successful integration of a number of core functions, or developed efficiency in joint planning, governing, and decision making.

The work here should not be aimed at negotiating an answer, but simply at determining whether all parties are generally in agreement about what they are seeking to achieve. There will be plenty of time to work on a more detailed set of objectives and measures as you move into negotiation and beyond. Sustaining alignment, particularly among board members, can be quite challenging as you move ahead, and being able to refer back to this conversation and its outputs often proves to be extremely helpful.


The next phases of work will include due diligence, negotiation, and post-merger integration. How best to approach each of these would require a series of related articles. However, to help ensure the phases are performed successfully, the board should coach and hold the senior team accountable for three other areas during the exploratory phase.

First, from the beginning of the process, the board needs to ensure the senior team is asking itself, “Are we setting the right context for future success in working together?” The aim is to create the history you want to have with your counterparts when challenges emerge and big opportunities arise. How they engage counterparts, how they speak to them, how they work with them, and to what degree they engage in collaborative exploration, imagining, analysis, and planning are critical. Done well, these steps set the stage not only for a successful negotiation and beyond, but also for the long-term future. Done poorly, these interactions are remembered forever, undermining trust even after two organizations are fully merged into one.

Second, the board should ensure senior management has an external communications plan that is both active (information the institution will share about what it is and is not doing) and reactive (how the institution will quickly and skillfully respond and manage the message if the word gets out before desired). Planning very deliberately about what to communicate and how to communicate to alumni, prospective students and faculty, regulators, neighbors, partners, and funders is critical.

Third, while managing external constituents through careful communications is essential, working closely with internal constituents is even more important. Treating faculty, administrators, staff, and students respectfully, tapping into critical expertise and perspective when most needed, and ensuring the buy-in and appropriate involvement of key leaders at the right times and in the right ways are critical as the steps above unfold, and should be done deliberately, systematically, and strategically. Clearly, managing information flow carefully in this early stage is critical; however, the success of the stages that follow—and the necessary ongoing collaboration—depends on bringing along university leadership at all levels.

The prospect of more universities using mergers as a vehicle for growth and transformation is exciting, but it requires taking a truly disciplined approach to assessing the goals, fit, and value of a potential combination. While this work is challenging, the questions are clear. It is incumbent upon the university board to pose them, seek rigorous analysis from the senior team, and work with them to test and refine their responses. Done well, this process will yield carefully considered and very well-informed decisions, and it will facilitate real alignment among the board members and between the board and senior management. Additionally, it will position the team to move forward in a way that most effectively and persuasively engages their desired partner. Whether the institution decides to pursue a merger or not, a byproduct of doing this work carefully and systematically is that the board inevitably will uncover important new strategic questions to pose, insights from which to learn, and pathways to consider.

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