A Strategic Lifeline for Small Colleges: M&A and Unified Education Systems

In recent years, the landscape of higher education has become increasingly precarious for many smaller colleges and universities. Declining enrollment, rising operational costs, and reduced government funding have placed tremendous financial pressure on institutions that historically served as cornerstones of their communities. For some, the path forward may lie in an innovative strategy: merging or forming a unified education system under a single U.S. Department of Education (ED) Office of Postsecondary Education (OPEID) number. This approach offers a potential lifeline for struggling institutions and opportunities for shared growth and enhanced student outcomes.

Understanding the OPEID Framework

The OPEID is a unique identifier assigned to higher education institutions that participate in federal financial aid programs. By consolidating multiple colleges under a single OPEID, these institutions can operate as a cohesive system, akin to state university systems or multi-campus private colleges. This model enables shared governance, resources, and administrative functions, while maintaining some level of autonomy for individual campuses.

The Case for Consolidation

1. Financial Stability: Smaller colleges often struggle with operational inefficiencies and economies of scale. Merging under a single OPEID allows institutions to pool resources, reduce administrative redundancies, and leverage collective bargaining power for procurement, technology, and facilities management. This can significantly lower costs and improve financial sustainability.

2. Access to Federal Aid: Consolidating under one OPEID can enhance the system's overall financial profile, potentially improving eligibility for federal grants and loans. This stability can provide reassurance to students and families, encouraging enrollment.

3. Expanded Academic Offerings: Unified systems can offer a broader range of programs by combining faculty expertise and sharing curriculum across campuses. This allows smaller colleges to compete with larger institutions by meeting the diverse needs of modern students without duplicating efforts.

4. Brand Strength and Marketability: A unified education system can benefit from a stronger collective brand, making it more competitive in attracting students, faculty, and philanthropic support. Marketing efforts can focus on the system’s comprehensive offerings, geographic reach, and commitment to student success.

   
   

Challenges and Considerations

While the benefits are compelling, the path to consolidation is not without obstacles. Merging colleges or forming a unified system requires navigating complex regulatory, cultural, and operational challenges:

• Institutional Identity: Smaller colleges often have deep historical and cultural roots within their communities. Balancing these identities while fostering a shared mission is critical to the success of a merger.

• Regulatory Compliance: Consolidation under a single OPEID must align with federal and state regulations. Institutions must carefully evaluate accreditation requirements and financial aid implications to ensure compliance.

• Stakeholder Buy-In: Faculty, staff, students, alumni, and local communities must be engaged throughout the process. Transparent communication and a clear vision are essential for gaining support and mitigating resistance.

  
  

Case Studies in Success

Several examples illustrate how mergers or unified systems have stabilized and even revitalized struggling institutions:

• Georgia State University and Perimeter College: This merger leveraged Georgia State’s administrative and academic infrastructure to improve student outcomes at Perimeter, significantly increasing graduation rates while reducing costs.

• The University of Maine System: By uniting seven campuses under a single accreditation, the system streamlined operations and enhanced collaboration, saving millions annually while maintaining student accessibility statewide.

  
  

Moving Forward: A Blueprint for Success

For smaller colleges considering this approach, the following steps can help guide the process:

1. Conduct a Comprehensive Feasibility Study: Assess the financial, operational, and academic implications of a merger or system formation. Identify potential partners whose missions and strengths align with yours.

2. Engage Stakeholders Early: Build trust and foster collaboration by involving faculty, staff, students, alumni, and community leaders from the outset.

3. Develop a Clear Governance Structure: Establish roles, responsibilities, and decision-making processes to ensure smooth integration and effective management.

4. Focus on Student Success: Prioritize initiatives that enhance access, affordability, and academic outcomes. Demonstrating a commitment to students will build credibility and support for the new system.

5. Communicate the Vision: Articulate a compelling narrative highlighting the consolidation's benefits, addressing concerns and emphasizing the shared mission.

   
   

Conclusion

The status quo is no longer viable for financially challenged colleges and universities. Mergers and unified education systems represent a bold but necessary strategy to navigate the challenges of modern higher education. KDM Advisors partners with Presidents, CFOs, and Board of Trustee members to analyze the optimal pathway for colleges and universities. KDM’s experts have hands-on experience in M&A and managing unified education systems.

Kenneth Maher is a principal at KDM Advisors, LLC, which partners with higher education leaders to build long-term sustainable business models that ensure financial stability and faculty/staff engagement. You can reach Ken directly at kmaher@kdmadvisors.com