A Midwest Merger: How Two Ohio Colleges Are Coming Together

Links We Mention

Strategic Mergers in Higher Education by Ricardo Azziz et al.

Chapters

0:00 - Introduction

01:32 - Future U’s Coverage of M&A

03:26 - A Merger in Northwest Ohio

04:44 - Pursuing a Partnership

08:29 - Finding the Right Fit

10:45 - The Challenging Federal Approval Process

16:21 - Managing Stakeholder Communications

22:09 - Lessons Learned

27:04 - The Leadership Characteristics Required

30:46 - The Timeline of Mergers

39:03 - Managing the Emotional Element

Transcript

Michael Horn

Jeff, mergers and acquisitions are all the buzz, as you know, in higher ed as colleges and universities face a short term future of tough decisions brought on by demographic and financial challenges.

Jeff Selingo

Yeah, Michael. And, yeah, for all the talk of M&A in higher ed, it's not really happening as much as you might expect. Why not? Today, we're going to go inside a higher ed merger that's in progress to find out the answer to that question on this episode of Future U.

Sponsor

This episode of Future U is sponsored by the Bill and Melinda Gates Foundation, working to eliminate race, ethnicity, Ascendium Education Group, a nonprofit organization committed to helping learners from low income backgrounds reach their education and career goals. For more information, visit ascendiumphilanthropy.org. Subscribe to Future U wherever you get your podcasts. And if you enjoy the show, send it along to a friend so others can discover the conversations we're having about higher education. 

Future U’s Coverage of Mergers

Michael Horn

Jeff, you wrote recently in your newsletter that M&A isn't exactly the right term for mergers and acquisitions in higher ed. What what did you mean by that?

Jeff Selingo

Well, simply put, Michael, M&A isn't in the DNA of higher ed. You know, this isn't the first time, of course, we've covered this topic on on Future U. two years ago, we had Mary Ludden who oversees Northeastern University's committee on acquisitions at the time. You might recall they had recently acquired Mills in California, and since then, they had, acquired Manhattan Marymount College. That's a topic, by the way, that we're gonna dive into on another episode of Future U later this spring. On that episode, two years ago, we also had Sally Amoruso. You might remember from EAB who had previously worked in helping health systems better serve patients. And, you know, we thought that higher ed could actually learn something from from health care.

Michael Horn

And, Jeff, of course, we learned something on that episode. And what we discovered is that as the feds squeeze health care payments to hospitals, there's a real incentive to scale. And for health care executives, there are personal upsides and incentives to M&A as a result.

Jeff Selingo

Yeah. And then, Michael, a year earlier in 2022, we had John MacIntosh who was a partner at SeaChange Capital Partners, which provides nonprofits, including higher end institutions with financial assistance and access to resources as they change how they do business. We also had Kasia Lundy with EY Parthenon on that episode. I think you could sense a theme here. Right, Michael? We keep returning to this topic over and over again because people are talking about it, but not much seems to change.

Michael Horn

Well, that's a bit of a pattern in higher ed, Jeff. And everybody says this year is the year it'll be different, but I think we have something we can continue to pull back the curtain on on this topic.

A Merger in Northwest Ohio 

Jeff Selingo

Yeah. So, Michael, we're gonna try it again this spring, and this is the first, as I mentioned, of two episodes on M&A. I'm gonna call it that at least for now. First up today, we have the presidents of Bluffton University and the University of Findlay. Both of these institutions are in Northwest Ohio. I've actually been to Findlay about a decade ago when I first met its president, Kathy Fell. Then last summer at the Mackinac roundtable on talent in Upstate Michigan, I met Jane Wood, who's president of Bluffton University, which as we'll hear isn't that far from Findlay. And she was telling me about their efforts to merge, both Bluffton and Findlay. And as we're gonna hear in a minute, they're in the process of merging after which Bluffton University will revert to its original name, which is Bluffton College.

Michael Horn

And then right after that, Jeff, in this episode, we're gonna be joined by the author of strategic mergers in higher education, Ricardo Azziz. So stay tuned for that after this conversation because it's not just gonna be you and me reacting to what we've heard, but we're bringing in a third voice on this. But first, let's get to the main event. Let's welcome Jane Wood, president of Bluffton University, Kathy Fell, president of University of Findlay. Welcome to Future U.

Jane Wood

Thank you.

Pursuing a Partnership

Michael Horn

So I wanna start with you, Jane. We think often of mergers in the higher ed spaces, really a solution for colleges that have their backs against the wall financially. They're in the red. They're bleeding cash. But that was not the case here as I understand it. Bluffton really initiated the search for a partner while still in relatively good financial shape. So why pursue a merger?

Jane Wood

When you say we're healthy financially, we are. But, right, like many organizations, we are not able to do many of the things that we would like to do in order to, you know, be at our very best. So we have been cash flowing the last three or four years. We're happy about that. Our bank is happy about that. But the truth of the matter is is that we haven't been able to fill positions that we would like to fill. Right? We haven't been able to, you know, fund faculty research perhaps in the way that we might like to do. We haven't been able to have raises perhaps in the way that we might like to do. So there are limits to even being financially stable in our market. There's there's there's many small private liberal arts institutions, and we are economically challenged in terms of how many well, economically challenged, but also in terms of how many high school students are coming, to small private independent colleges each year. The number is dropping dramatically and predicted to drop even more so. So as our board looked at, you know, what does the future look like in three years, five years, ten years, we just didn't see that that margin doing anything but continuing to get smaller and smaller. And what does that mean? That's that's not a positive look forward. And so they they asked me to be proactive.

Jeff Selingo

So, Jane, tell us a little bit more about your mindset in in pursuing this because there is an approach, I think, in higher ed that, you know, we got this. Right? You know, we could do this alone. We can survive. And in so much of the higher ed market, as you mentioned, not only in Ohio, but other where other places is kind of made up of small colleges. There's a lot of small colleges, you know, around a thousand students or so, sometimes even smaller, where leaders think, well, we'll be the ones who make it, and then we'll take those other students from those institutions that don't make it. So how might you persuade them, meaning your colleagues at these other places, that the time might be now to follow in your footsteps? Because there's certainly an emotional piece to this. I don't think anyone wants to give up their identity, but I think that they as a result, they kinda cling too long for that. Jane, what do you think of that?

Finding the Right Fit  

Jane Wood

Of course, you wanna be the president who comes in and saves the institution and finds the silver lining in in a dismal situation. And and I think we did do some of those things. We worked really hard. I'm really proud of our faculty and staff. Not only did we, you know, make financial, decisions that were difficult for them sometimes, but we also implemented a lot of really innovative and great new ideas. But even implementing great new ideas doesn't change the fact that more and more students want free college. Right? And more and more students are saying, you know, we're struggling to afford college. And so, especially in Ohio, especially in our demographic, the Mid The Midwest and, you know, the Northeast also. And so, you know, as as wonderful as I think we are, I think we were realistic as a board to say, we believe in our identity. We believe in our mission. We wanna work really hard to preserve those even as we merge. But it is almost hubris to think that we can be the one who can survive as a college under a thousand, right, in our demographic in Northwest Ohio.

Michael Horn

Kathy, I want to turn to you now because Jane then she reaches out, you know, approaches you about this proposed merger. You have a follow-up meeting with, board chairs, both of you, and and you hired firms to conduct, financial analyses and start to think through, you know, is this a good idea? And it comes back. This is you know, this makes sense for both institutions. Tell us the case for Findlay. What in particular made Bluffton a good match from your all perspective?

Kathy Fell

We were honored to be asked, intrigued, and excited. So I took, Jane's conversation back to my own table and gave it great consideration, spoke, of course, with the chair of our board. The chair of our board and I were invited to meet with Jane and her chair, and that's where this conversation really began. Our chair has done a great deal of mergers and acquisition acquisitions in the business world, so he's familiar with the practice. That's very helpful. We are excited about it. We were excited about it then. We are excited about it now because it opens for us opportunities for more students, more programs, more assets, more teaching space, more lab space. We'll have extremely competent analysis conducted internally and externally before before we go through the application process for the change of control, which would happen in May. But we believe in this merger. We believe it is an innovative and appropriate, project for a campus like Findlay to merge with a campus like Bluffton. We are already setting up shared services, which are been are going to benefit us both tremendously. And that's a thing campus campuses can do without considering a merger. And and that's also a good way to test some of our assumptions about each other.

The Challenging Federal Approval Process 

Jeff Selingo

I I like that test and and learn, right, through the through the shared services. So, Kathy, you talked a little bit about, kind of this change of control approval and the amount of of paperwork and time and effort that it takes. I I know that in in conversations, you're a little frustrated just at the resource and time intensive that application processes. Can you tell us a little bit more about those resources and time? Because I think, again, for other institutions out there that might be considering it, like, what should they be ready for?

Kathy Fell

That's a good question, Jeff. And if I am frustrated, I want you to understand that in the context of this. I'm probably the most patient person you know. So there is reason for frustration, not blame. I'm I I have no one to blame. I'm not angry with the federal government. I may be the last person on earth not angry with the federal government. But but there are frustrations embedded in the process. The process needs to be improved. So we have we must, of course, apply to HLC, our creditors, and the Ohio Department of Higher Education. We'll get that ready. We and by May and make the application. And we don't expect HLC to turn this around in a few weeks. Not fussing about that. But, also, the federal government enters in phase one of this to approve a change of control. And during the period that the federal government is moving from phase one to phase two, where a full merger might be, approved, we could be waiting for eighteen months to three years. The the issue with that is that we can do some things, but we are very limited in the things we can do. These early stages of this process nationwide will, I believe, inform and improve future opportunities for other campuses. That is my hope.

Jeff Selingo

Yeah, and it seems like you have to speed that, to line up. We must. Because otherwise

Kathy Fell

How are people going to do this?

Jeff Selingo

Because how are people gonna do this? Because most approach this a little too late. Right? And and if they have to wait three years It's too late. And and for The advantages of the merger are gonna be gone by then. Right?

Kathy Fell

For both campuses, really. Yeah. Really, for both campuses, campuses. And that's a problem. They can take the cost of application and processing can take from a few hundred thousand to several million. And I absolutely can see that. And it will certainly cost us a few hundred thousand. Now we have had good fortune in having external grants and funding sources to help us thus far, and we are going to help each other. But in order for higher education to remain strong in The United States, independent, student focused, successful institutions need to survive and thrive. I'm not saying that all institutions will or should survive. I'm I'm a realist. If you don't have enough students, you don't have enough. You you are not gonna fill all your seats. If not enough people are being born or going to school, we we live in the real world. But many of our schools are game changers for students who will not thrive at large publics. And our communities depend on us for thriving as well.

Michael Horn

So, Jane, let me let me turn to you off that because, I mean, you addressed the dangers of hubris or emotion getting in the way of a rational decision given the landscape that Kathy just painted. But I'm I'm curious how you see I mean, this approval process could be a barrier to more institutions pursuing mergers as well. And perhaps Kathy's not angry at the federal government. But if you could change anything, wave that magic wand, what would it be in the process so that you could allow more institutions to more easily do what you're doing?

Jane Wood

Right. You know, I I would love to see a streamlined streamlined process, confidential process, where boards and presidents could submit their information and get even a, preliminary nod from both HLC and the federal government to say, okay. You know, go forward. You know, you still have to meet these criteria, you know, sort of like, you know, when you submit your taxes and you're using TurboTax. Right? Like, you know, you you have to say, you know, we meet these qualifications or we don't and, you know, then you can move forward to the next step. So, you know, if, for example, we would get all the way to application and close to change of control, an HLC would come in and say, you know what, we have a concern about x y or z. I mean, we have made significant changes on our campus already that will be very hard to undo. You know, our alumni, some of them, not all of them thankfully, but some of our alumni are very upset with us. Right? So giving may be down. Ricardo Azziz told us we shouldn't see a drop in enrollment, from this last fall, and we didn't, But that probably we would see one coming this coming fall. And so, you know, if you extend this too long, especially if you're an institution that's not financially, you know, having, you know, a great endowment or or a lot of, bandwidth, you're really limiting what they can in fact do.

Managing Stakeholder Communications 

Jeff Selingo

So, Kathy, I wanna talk a little bit about the communications aspect of this because getting the right information and the right people in the room to help consider a merger kind of without setting off alarm bells before decision is really made can be kind of a a tricky tricky balancing act, I'm sure. Right? So when did you decide it was time to publicly announce that you're pursuing this major?  This merger, because at some point, you have to tell people. Right? So talk a little bit about that process, that navigating that.

Kathy Fell

So probably a year at least a year after Jane and I had our first conversation, we made a public announcement. But we had so many so much work to do prior to that. We had a small subset of our boards, sign NDAs, in order to for us to be able to speak to them and to get their advice on how to analyze whether this was worth going forward. It's not that we were doing anything underhanded or scary, but we didn't want the public to know that we that Bluffton and we were considering a merger unless we were going to get serious about it. For one thing, we wanted if we decided we weren't interested, we wanted Bluffton to have the opportunity to pursue a partnership with someone else. And we didn't want everyone protesting before we had even decided what we were going to do because there are many ways to partner. They're not all full of mergers. And so it needed to be, kept confidential. And I think we did an exceptionally good job of it. There was speculation that we might partner when Jane and I had a glass of wine in Downtown Findlay, and we were really just talking about where are you going on vacation. So, you know, you can't control

Jeff Selingo

So you have to know to, like, go far away to 

Kathy Fell

Right. Or just ignore it. I mean, just Ignore the gossip. And and finally, they get bored because they they don't it it goes away. But together, we had a team, an inside team on both campuses to help us plan the public announcement. And it was planned beautifully, I will say. We we made simultaneous announcements. It was we opened ourselves up to newscast newscasters. We met with students and, alumni. Over the next week, we met with every group that would have us. I went to Bluffton to speak with alumni and community members. Jane came to Findlay for the same. And we took some hard questions during that time. Not so many from Findlay, but quite a few from Bluffton because alumni care about their campus.

Michael Horn

This emotional piece is real, right, for for each institution, for the communities and so forth. And as Kathy just said, like, each institution is obviously going to be preserving certain aspects of their identities. That's important. At the same time, you know, there is a delicate balancing act because, you know, not everything could be preserved, and mergers are rarely, if ever, a marriage of equals, if you will. So just tell us a little bit more about how you managed those tensions, those fire points when alumni communities were upset, whatever it might be that reared its head.

Jane Wood

Right. So, you know, the consultants told us and we did prepare for, a petition that, people signed to say, you know, this needs this needs to stop. And so I think part of that is just, being prepared and knowing that it's coming, talking to people ahead of time about this is what we might face. Let's put a plan together so that you can have as few surprises as possible. And then as Kathy said, I think our teams did a wonderful job of laying the groundwork early on to say, here are the pieces that are really important to us at Bluffton University, our mission, our D3 athletics, you know, our mascot, the Beavers, you know, we've been Beavers forever and we're very excited and happy and proud about that, that we maintain our our, you know, our purple and white. And so, you know, there were all these rumors flying around in the beginning, and Kathy and I would use humor to deflect them, and I'm grateful for her patience. I don't share her level of patience, so I'm always grateful for it. And I wish I had it in fact. And so, you know, being being available to people to say the same thing over and over and over so that they can hear it and be comforted. We have 17 transition teams that started meeting almost immediately and we had equal numbers of people from both Bluffton and Findlay on these transition teams. So right from the get go, we had people on our campus meeting their counterparts on, Findlay's campus. Many of them knew each and we live 17 miles apart. The religious faculty already knew the other religion faculty at Findlay. And so, you know, bringing them together for a shared purpose created a lot of goodwill. So we had a lot of good energy from the start and then we just said to our folks, listen, for the people who can't get on board, we are just gonna continue to care about them from afar until we can prove to them that what we're doing is right and true in the best long term interest. And it may take, again, to back to Kathy's patience, it may take three years, five years, ten years, But, eventually, we hope to be able to show them that this is this is really still their university, and we're still here. They can bring their grandchildren to see us.

Lessons Learned 

Jeff Selingo

I really do think one big reason mergers aren't pursued in higher ed is around culture. Right? These are mini cities where, as you talked about, everybody knows each other, especially in these smaller towns on top of that. Right? There are alumni. There are parents. There are students. There's all these multiple stakeholders. You're not really just trying to serve the needs of shareholders. Right? You you mentioned, you know, people on your board who have, experience with mergers and acquisitions. I'm sure they've never seen anything like this, right, in in their own mergers and and acquisitions. So is there one piece of advice each of you have learned in this process so far that you would give to other leaders about how to ease the fears and anxieties of all these different stakeholders in the community as you lead into that big change, whether that is trustees themselves, alumni, students, parents, faculty, staff, other people on your senior leadership team. Right? Just think of all these different stakeholders. So one just short piece of advice that you each of you have learned in this process. And and, Kathy, let me start with you, and then we'll end with Jane.

Kathy Fell

Be open and honest with them. Be sympathetic and empathetic to their reasonable questions, and don't return nonsense when you're asked a nonsensical question.

Jeff Selingo

Even though you might want to, I'm sure. Right? Sometimes. Jane, how about you?

Jane Wood

You know, after a long day of talking to people, I went out on the road. I crisscrossed all of last semester from California to New York, visiting with people and donors some of whom are very supportive and some of whom are not. And at the end of the day no matter what conversation I had I was comforted by the fact that we really believe in this merger. We believe in the reasons behind it. We believe in the logic. We believe in our cultures. We believe in the leadership at Findlay. And so if you really believe in your case, I think that is your that is that is your strongest asset, both with with donors, students, alumni, but also with self.

Jeff Selingo

Yeah. I mean, I I just think a lot of this takes courage and patience, and I don't think higher ed, has a lot of either. So it's, so I appreciate you both being on here, Jane Wood, president of of Bluffton University, Kathy Fell, president of Findlay, University of Findlay. Thank you so much for being on Future U, and we'll be right back.

Michael Horn

This episode of Future U is sponsored by Ascendium Education Group, a nonprofit organization committed to helping learners from low income backgrounds reach their education and career goals. Ascendium believes that system level change and a student centric approach are important for our nation's efforts to boost post secondary education and workforce training opportunities. That's why their philanthropy aims to remove systemic barriers faced by these learners, specifically first generation students, incarcerated adults, veterans, students of color, adult learners, and rural community members. For more information, visit ascendiumphilanthropy.org.

Jeff Selingo

This episode is being brought to you by the Bill and Melinda Gates Foundation. Today's college students are more than just students. They are workers, parents, and caregivers, and neighbors. And colleges and universities need to change to meet their changing needs. Learn more about the foundation's efforts to transform institutions to be more student centered at usprogram.gatesfoundation.org.

Michael Horn

Welcome back to Future U. And as listeners know, this is the part of the show where Jeff and I typically, weigh in with our various reactions to what we just heard and put things in greater context around what it means for the future of higher education. But, frankly, because as Jeff said in the beginning of the show, we've done a lot on mergers and acquisitions in higher ed. We thought bringing in a different voice to the table, to help us out on this would be would be useful for us all. And so he's someone who's literally wrote the book on strategic mergers in higher educations that that's actually the name of the book, Strategic Mergers in Higher Education. His name is Ricardo Azziz, and he's had a distinguished career in academia. He's a leading expert in reproductive medicine, a former university president. He led Georgia Regents University, now called Augusta University, and he's now a consultant to higher ed institutions. And he's also the author of a new book, Leading Existential Change in Higher Education: Mergers, Closures, and Other Major Institutional Restructuring Now that's just, scratching the surface, I'm sure, but as you can hopefully hear, we thought he was the perfect person to join us, on this topic. So, Ricardo, welcome to Future U.

Ricardo Azziz

Thank you for having me, Jeff Michael. Admire what you all do. Thank you.

The Leadership Characteristics Required 

Jeff Selingo

So, Ricardo, I know you got to work both with Bluffton and Findlay on this merger. So maybe let's, you know, let's start there. You you got to see them up close. Your newest book is on the topic of what leadership, needs to look like when a big scary change is afoot or should be afoot. What are the leadership characteristics required to get a university to take this sort of action proactively? There's a a lurking derivative question, I suppose, of when is the right time to even initiate this. Right? Did they get it right, and what are the leadership characteristics, really required to get through this?

Ricardo Azziz

Well, I I it's a great question because, frankly, I think Jane and and Kathy really have and exemplify some of those leadership characteristics. I really think it it takes courage. And so that's the what we call the number seven or number one characteristic. You need to have the courage of your convictions and the courage to actually face what we call ugly news. Right? You know, you have to face the facts. So when we talk about leading big scary change, restructuring, closures, planned closures, of course, mergers, these kind of things, you have to have significant courage. The other thing you have to have, and there's a number of things we talk about in our book, but the other thing you have to have is sort of a willingness to work in ambiguity, to understand that it's not gonna be black and white, that in fact you don't know when this is going to happen, that in fact it's it's actually gray. Lots of higher ed leaders don't like that. Right? Most leaders say I don't want to make a move until it's very clear and I have all the facts, but when you're dealing with big scary change it's simply you're never gonna have all the facts. Right? You're never gonna know exactly what what happens in the future, so you have to be willing to step into that. The other thing I think as a leader, that both Jane and Cathy have exemplified is that they have been able to provide an operational envisioning. It's a it's a term we use to provide a vision, but also to provide sort of the mechanics. How is this going to work?

Jeff Selingo

But, obviously, you have boards and others involved. Right? A lot of people besides the president, him or herself, have to be able to see through this ambiguity. Right? Because it can't just be the the president by themselves. Correct?

Ricardo Azziz

You're absolutely correct. Because in the end, major restructuring of universities belongs to the governing boards. They are the only ones that have the actual authority to get these done. And so when I talk about leaders, you know, there's always one leader that brings the rest. Sometimes it is the president. Sometimes it is the board chair. Sometimes it's the board vice chair. Sometimes it's another member of the board that's willing to bring people together. Now I've always been asked how do you start the narrative around this, and I always tell people one individual at a time. This is not something you present an idea to a whole group and the whole group goes, oh, yeah, sounds, like a great idea. No. You actually have to work one individual at a time. Sometimes it's the president who comes in, looks at the book, and says there's no way we're gonna be, you know, functioning twenty four months from now, or sometimes at the board chair has been working at it and says, you know what? We've been here before. We need to actually we owe the students and the faculty, a plan to think. So, anyway, these are people who are leaders. So when I speak of leaders, I'm not just talking about presidents. I'm talking about, obviously, whoever takes charge a little bit of convincing their members one by one because it takes that kind of work.

The Timeline of Mergers

Michael Horn

So, Ricardo, there's a lot that's striking in that. We're gonna wanna come back to a couple of those themes. But one thing that struck me in all this is that in in in our words, you know, as I think about innovation, it sounds like Bluffton, you know yes. They were in the black, if you will, but they couldn't keep up with the costs of sustaining innovation. The investments needed to remain competitive, attractive, and the like to you know, for continuous improvement. And, heck, you know, they knew that there was a lot of deferred maintenance that they needed to do that they just weren't attending to. And Jeff and I were talking about this after the interview, and we just couldn't believe, though, the timeline that this process takes over, how long it takes. It just seems crazy. And I guess first a reflection for me off that, which was a couple season ago, we had some folks on who had healthcare backgrounds. And what became clear, I think, in that conversation was that in the absence of financial incentives to merge a la health care, you know, an analogous sector off into higher ed, and then you couple that with this timeline, it it almost feels like a wonder that any colleges merge like this proactively or, you know, before it's too late, if you will. And so I I I'd love to just get your reflections around that and perhaps the the lengthiness, if you will, of the merger process because that could really sink a school that's maybe struggling and having to go through all of that. And so I maybe you'll convince me otherwise. Is there any upside in how long this takes? Or and if not, what would you do differently?

Ricardo Azziz

Healthcare has been having, right, has an experience with mergers, acquisitions, closures for a long period of time. And in that case, there there is a tremendous amount of feelings about this. There's a culture. There's a community. People are angry that their hospital in their region closed, etcetera. So there is emotions running, but it's not the same level and not the same kind of commitment that one has to a institution of higher education. Right? There's not alumni of a hospital, right, and so on so forth, and most people that are employed by a hospital can find a jobs very readily. Right? You know, higher, health care is in high high demand. So so there's similarities and differences, but but I think your the question really of when is something that plagues all of these discussions. I try to tell schools and school leaders that they need to start planning ahead. They need to begin to factor in strategic restructuring, whether it be an acquisition or a merger or even a planned closure, these kind of things, but well before they actually think they need to do it. I mean, just because you strategize around it, just because you think about it, just because you become familiar with it, just because you understand the facts, doesn't mean you have to do it. But what happens is if you do not think about it and you don't present it in your strategic planning and you don't talk about it, then you're blindsided when you need to do this. K? So you need to begin to engage in the conversation well in advance of actually even presenting the option in in in advance. The other thing, and I think this is really to to Jane's credit, leading Bluffton, is she understood where the numbers were going and she understood what the environment is. I mean, there are three things in higher ed environment today that we need to accept. One, there's massive excess capacity. Right? There's about 5,000,000 undergraduate slots that are in excess, that that we could train another 5,000,000 undergraduates in with exactly the resources we have. Now that doesn't take into account the geographic, you know, mobility and all these kind of things which are important. Right? The students really wanna many students wanna go to institutions close to home. The the second fact is that the costs are rising. The costs of doing business in higher education, keeping up with AI, keeping up with online, you know, just meeting regulatory demands, etcetera, etcetera, are going up, right? There is not just the inflationary factor if a lot of other costs. The third thing that we have to understand is that in the end, yeah, in the end, the demographics don't lie. There's only so many people that are gonna want to go to school and forget the fact that actually higher education is being devalued politically and otherwise. This isn't that's another factor, but the reality is there are just less people that need to go to college. Right? We've talked before about how many individuals in our nation need to have a four year higher education degree. And if we do the math, probably around 45% of the population needs to have a four year higher education degree. The rest can have certificates and and, and all sorts of other kind of education because in the end, when you and I say, okay. This week, the people that I need the most are my plumber, my mechanic, my electrician, my HVAC person, etcetera. Those are the people you really need. You don't actually say, I think today I need a PhD. No. No. No. It doesn't. So we have to be realistic, those of us in higher education, that, A. This is not about training the entire world in a four year higher education degree, and, B. This is not about really understanding that the demand is gonna go up. Demand, very likely, will continue to decline.

Jeff Selingo

So, Ricardo, just two quick questions then, as we start to wrap up here. One is, it sounds like your point of view is we need a lot more of this, right, in the, in the environment. So what what needs to happen, on the regulatory side, on the state side? Obviously, a number of things probably need to happen, but is there is there one lever that you would pull to try to either encourage these or make these move faster?

Ricardo Azziz

So for starters, a lot of the regulatory burden currently on mergers, this business of slowing down mergers, two step process, and so on, is clearly slowing down the ability of institutions to merge because, a, you're gonna need to keep these institutions alive and financially viable with their own OPEID number for a much longer period of time. But the but the but the flip side is this, if you're the government and you say lots of these schools are taking federal dollars and Pell grants, etcetera, and they're not really performing at the level that they need to be, and they're really not don't have the capacity to provide the services that they should, so maybe they should cause. So maybe we should do a stress test much like we do with banks and much like we do with other institutions. Maybe we should do is, you know, put them under stress. They close, God be with them kind of thing. The problem with that, of course, is that it tends to be clear or at least tends to be a value if you're a government, right, trying to reduce waste, if you would, but it isn't the best for students. So that's where actually having incentives for schools and leaders to say, listen, you're gonna end up closing. Your numbers don't look good. Why don't you start planning on closures now? And that's where the regulator, the regionals, should actually step up and that has been an area where the regional creditors have not stepped up. They're not willing to tell institution, you know what? You're gonna be closing, so let's start planning.

Jeff Selingo

You know, Michael always reminds me of this that this is an emotional thing. Right? We we tend to approach this very clinic in a in a clinical way. But as you noted, right, like, hospitals don't have alumni. Right? They have obviously former patients. I always remind people that when I'm on summer vacation, I'm walking down the beach, in at the Jersey Shore, people will be wearing college shirts, you know, and they might be in their seventies or eighties. And and I say, oh, do your grandkids go to, you know, fill in the blank school? They said, no. I went there. And I'm like, who advertises a product that they essentially bought, like, fifty, sixty years ago? You know, there's really nothing else in America that or around the world that goes like that. So there is an emotional piece to this. How do you get over that in this process?

Managing the Emotional Element

Ricardo Azziz

Well, to to be fair, I don't know that you can get over that. I mean, there is no doubt about it that it's highly emotional, highly culturally, you know, all of us are alumni and we'd like to celebrate it, and the more we celebrate with football and college season and so on and so forth, I mean, my wife was a graduate of the University of Alabama, and every Saturday during the season, she'll deck out in that thing, sit on the couch and watch the games, and I'm a football widow. So I get the emotions. The problem is we need to think about students first. And if leaders begin to actually understand that they need to do the best they can for their students, current, future, and past. Right? If you abruptly close, there is no option to preserve heritage and create a center for the past of an institution. If you do a planned closure or a merger, there's lots of options on how to preserve the alumni functions and so on. There's lots of options on how to make sure your students current and future have opportunities. So what I tell leaders is put students first.

Jeff Selingo

Bluffton is the smaller player here, student enrollment wise. I think that when most people think of mergers and acquisitions, they think of the the the institution that's kind of, like, leading this or taking over as, like, the bigger player, right, a la Northeastern. That's not always the case. Correct? Or shouldn't or we shouldn't necessarily think of that as the case.

Ricardo Azziz

Well, you're absolutely correct. For starters, we do not encourage the use of the word acquisition in higher education, and I'll explain why. This is not just a political correctness. It's the you know, acquisition really refers to real estate deals. Right? Because in a merger, even a small institution, larger institution, the smaller institution still can bring a lot of talent to bear, a lot of, if you would, you know, even talent managerially. They've been able to actually discover how to do things much more efficiently than otherwise. They have perhaps a brand or a location or other things. So one of the things we help our clients really is to remember to identify the positives in them. Right? Because very many of these schools say, we have nothing good to show. We have nothing, you know, who's gonna want us? The truth is these are mergers. Small or big, they both partners bring in things to the table.

Michael Horn

So, Ricardo, thank you, for joining us. Thank you for freshening up, the otherwise stale conversation of this topic that Jeff and I would have had. So, and, a reminder for all you listening to check out Ricardo's new book, Leading Existential Change in Higher Ed. Couldn't come at a more critical time. And also a thank you, of course, to Jane at Bluffton University and Kathy at the University of Findlay, and a reminder, that for us, Jeff, that we're gonna have to follow the, merger story there through to its conclusion wherever and whenever that ultimately is. And thank you to all of you, of course, for listening as always. We'll talk to you next time on Future U.