Merger (Alliance) Model for 10 or More Private Colleges

Merger (Alliance) Model for 10 or More Private Colleges (April 2020)

First in the series.

We are using 10 private colleges from Illinois and Missouri to create our business and financial model. These 10 colleges will be the foundation for a series of posts about a merger model that would bring 10 or more private colleges together. Included in this set of 10 colleges will be ones who are even now considering when they will announce their closure.

These 10 colleges lost more than 2,000 students in combined enrollment from 2013-2018.

• 8 of 10 lost FTE enrollment
• Only 3 of the 10 had lowered their expenses since 2013
• 8 of 10 had lower core revenues in 2017-18 than they did in 2012-2013.
• Endowment assets decrease in 4 of the 10. 3 others had their endowment increase only 7 figures in 6 years.

Here is the basic framework.

1. No college loses its identity. The college name remains. The mascot remains.
2. Endowments stay with the individual colleges.
3. Leave athletics alone. In each of these colleges, a substantive part of the enrollment is from those who compete in one or more sports. The opportunity for them to continue with their college athletic careers is an absolute requirement of the model. Athletic leadership could be consolidated - even across multiple levels of NCAA participation.
4. Target at least 50% of all courses offered by the merged organization to stay online. Merge those common courses to enroll a minimum of 15-20 students per course. This will provide higher margins mostly with lower labor costs. For example, one of the potential by-products of the pandemic reaction is a realization that online course sections with low enrollment could be consolidated into larger sections across different colleges. Teaching an upper level accounting or biology course with 20 students from 5 different colleges is more financially feasible than 5 different college sections with 4 students each.
5. Revenue and costs to each college would be allocated based on financial, enrollment, and outcome ratios.

The FTE enrollment number was positively supported by only one of the ten - which netted a reported increase of almost 3,000 students in the 6 year period. Over the same period, only 2 of the 10 colleges generated a tuition revenue to expense ratio that was greater than 1.00. Core expenses for the 10 went up over $60M with two-thirds of that from just two of the colleges. The total core revenues for the group was a negative $25M - with one of the colleges in the red over $27M and another in the black at almost $33M.

Next in the series. Upside. Downside. Consequences.

Go to www.collegeviability.com for more articles, information, and reports.