Mergers are becoming increasingly popular in higher education. Last year, three renowned institutes in Sweden announced they would fuse their organizations into one entity entailing 70.000 students and almost €1 billion in research funds. In the Netherlands, a similar trend can be observed.
What makes scaling up so attractive to policymakers and university leaders alike? A cosmetic reason might be that larger institutes produce more research and fare better in rankings. Beyond that, a certain scale is vital to achieving breakthroughs.
Lessons from commercial sector
The British Higher Education Funding Council (HEFCE) had a closer look at this issue and drew up a report with best practices for collaborations, alliances and mergers (CAM). The authors note that "most research in the HE sector, both in the UK and in other countries, has focused on mergers rather than collaborations, alliances, consortia or joint ventures."
Inspiration here can also come from the commercial sector. "Notwithstanding the many differences with higher education, some of the general lessons from the private sector are worth noting. [There,] a high percentage of mergers fail outright or do not achieve the expected benefits in terms of increased shareholder value or efficiency gains."
Form, evidence and process
To guarantee that university CAM activities do not share a similar fate, a number of questions have to be answered:
Regarding theform of relationship, "teaching, research and knowledge exchange" needed to be placed at the heart of any potential CAM. "Successful CAM projects have a strong academic purpose that is underpinned by a sound economic rationale."
The HEFCE report also warns of completing mergers simply for the sake of scale. "Issues about the size and scale of institutions are complex and inadequately researched in the existing literature; but size in and of itself is rarely a good argument for merger."
Look for complementarity
All forms of CAM entail the potential benefit that they "enable institutions to share risk with partners in achieving their objectives". This may refer to sharing costs or capacity. Mergers, in particular, could furthermore be accompanied by other reforms. "Mergers can be a 'point of discontinuity' with the past, allowing institutions to achieve a whole series of changes that would be more difficult to achieve piecemeal during 'business as usual'.
In any case, complementarity is crucial for mergers. "Mergers are likely to be more successful where, through a careful analysis of objectives and activities, most of the institutions' major operations are compatible or complementary."
"Geography and distance sometimes constrain the effectiveness of mergers, so selective collaboration might be a more viable alternative. Co-location is often necessary to deliver significant synergy or efficiency. It is important to consider the impact on students and staff of any rationalisation of multi-site operations."
Do not underestimate costs
Regardingevidence, the report states that a complete cost-benefit analysis is vital to success. "A rigorous options review, prepared objectively and subject to consultation, should precede any agreement in principle, and it is important to engage with dissenting views. Where a proposal a?ects students, their interests and needs will be a major priority."
HEFCE also points out that costs could easily explode. "Merger costs are often underestimated, particularly in areas such as harmonising pay and beneits structures, ICT systems and administrative processes. These costs can be very substantial where the merger is between higher and further education institutions."
Therefore, due diligence is key - especially to minimize renegotiation risk. "Given the tendency to underestimate costs and risks, particular attention needs to be paid to due diligence, and it should not be done so late in the process that its results cannot be properly taken into account and the proposal reconsidered or renegotiated if necessary."
Regarding thechoice ofprocesswhich will yield an optimal outcome, the authors say that "leadership from the outset is vital: all the initial questions concern mission and strategy, and leaders can help to drive the whole process, overcome obstacles and negotiate with stakeholders. Institutions and their potential partners should develop a shared vision before acting, as clarity about objectives will energise the parties and avoid wasted e?ort"
"The senior management structure and governance arrangements in the new institution or venture need to be agreed at an early stage, perhaps as part of a memorandum of understanding. If these issues are not resolved, ambiguity may undermine trust, or senior managers and governors who have a strong commitment to existing structures could be an obstacle to change."
"The change process is dynamic, often messy and subject to the influence of unexpected events; institutions should therefore agree 'break points' to mitigate the risk of being swept along and missing warning signs. An implementation plan is an essential part of the process, and it should be kept under review and modified as necessary."