Mergers could have long-term financial benefits for public institutions, report finds
- A new report from the Teachers Insurance and Annuity Association of America (TIAA) finds that as federal and state support for public higher ed institutions continues to decrease, mergers may be the most financially and sustainably strategic option.
- The report suggests that while mergers can be painful and costly, they should not be solely a last resort option for institutions running low on resources — as the option can result in financial savings, greater size and scale, and reinvigoration in the confidence of stakeholders.
- The report also highlights seven critical elements of merger success as being having a compelling unifying vision, establishing a strong governing body, solidifying the right leadership, promoting the right sense of urgency, having a strong project management system, creating a robust communication plan, and maintaining sufficient necessary resources.
As public institutions find it more and more difficult to acquire support from state and federal policymakers, many — especially the smaller ones — will find the prospect of mergers more attractive. And research shows that states are currently spending about $9 billion less on higher education than they were in 2008, while other data from this year demonstrates about 33 states had to cut their higher ed budgets because revenue grew slower than their original projections. These numbers point to the reality that the potential for mergers is probably going to grow.
What the TIAA Institute report demonstrates is how to frame merger as a benefit, rather than a loss. Done well, the strategy could lead to more financial stability and help both institutions maintain their vital stakeholders. While many schools have resorted to cutting programs and selling assets to stay ahead, leaders may be better off working together with state policymakers to make sure they can at least cover mandatory costs, they can come up with a solid plan of action with a partner institution that is mutually beneficial. Before that happens though, campus leaders can always seek out alternative sources of revenue ahead of partnering up on certain initiatives.
Follow Shalina Chatlani on Twitter