Apr 22, 2021 | 5 minute read

Tags: college enrollment, college mergers, fundraising, higher education, strategic partnerships, transformational partnerships fund

Mergers and vineyards: At what risk independence?

By Judith R. Sizer

Massachusetts is at the cutting edge of college closure regulation in the United States. Our state higher education agency, the state Attorney General’s office, and the regional accreditation agency have actively collaborated to identify struggling colleges and to work with schools to minimize the negative impact on students and other stakeholders. New legislation, new regulations, augmented legal interpretations, and other guidance have all appeared since the abrupt closure of Mount Ida College in the spring of 2018.

Devoted to their institutions, some boards are diligently exploring every possible avenue to stay independent, including new revenue and enrollment strategies, creative fundraising, and targeted asset sales. At the same time, the Massachusetts Attorney General’s Office has emphasized that as trustees of a charitable institution, their fiduciary duties require them to prioritize the mission of the institution over its continuation as an independent entity.

“Trustees and officers should recognize that they owe fiduciary duties to the charitable mission of higher education more than to the continuation, at all costs, of the particular institution they serve,” wrote Massachusetts Assistant Attorney General Jonathan Green, whose office is responsible for overseeing nonprofit organizations and public charities. (For more, see his letter to the MA Department of Higher Education regarding Mount Ida College.) The Massachusetts Attorney General’s Office has also recommended the Vermont Attorney General’s recent review of the Marlboro College/Emerson College transaction.

Boards accepting that independence should not be their primary, all-consuming goal have carefully evaluated five elements of their institution when considering how best to proceed:

  • Its distinctive mission of education, as pursued over its history
  • Its people, including its students, faculty, staff and the surrounding community
  • Its charitable and other assets, including its campus, endowment, programs and collections
  • Its liabilities, such as debt and deferred maintenance
  • Its legacy, including its name, identity, founders and leaders

Some boards believed that a particular solution should be explored to the extent that the institution’s mission would be continued, its net assets preserved to support that mission and honor its legacy, and its people provided with resources and time for transition. They understood that no solution would be perfect, and all options should be judged against an honest assessment of the status quo.

For several small institutions, the best path forward has come in the form of combining with a larger institution that wished to carry forward the mission and legacy within its more expansive context. In these cases, the two institutions work together on satisfying obligations, transferring assets, enabling the orderly transfer or teach-out of students, and creating employment paths for some faculty and staff.

Yes, a merger or acquisition means a loss of independence. The board of trustees of the smaller institution would no longer govern a separate legal entity. The president of the smaller institution would no longer be a president, although he or she might transition to a leadership role within the larger institution. But the mission and legacy of the smaller institution would be given the opportunity to take sturdy root within the stability of the larger one. The leaders of the “grafted” institution would be able to focus their time and energy on their institution’s core mission, rather than the many distracting day-to-day financial, legal, real estate and other headaches that come along with independence.

In such cases, a merger or acquisition inevitably means that some students, faculty, and staff would need to find new paths. However, with advance time for preparation and generous support, this can be a wiser option than continuing to run the risk of an abrupt closure. Boards should place a very high priority on assisting those people who have invested significant time and energy in their institutions and may not have advanced degrees. They should also honor and respect the alumni/ae, many of whom may feel a sense of loss, nostalgia and regret.

Yes, a merger or acquisition could mean a change for the campus, the employees who care for it, and the economic and cultural engine it may represent to the surrounding community. However, the larger institution would be in the best position to retain the campus (and the employees) for its own students and/or other academic pursuits. This type of transition would be more likely to happen with adequate time for planning, rather than a disruptive “forced sale” situation. Stronger institutions concerned to “do no harm” should think carefully in advance about what types of partnerships would be attractive to them, so as not to waste the precious limited time of institutions that approach them.

As Mary L. Churchill and David J. Chard of Boston University Wheelock College of Education and Human Development have argued in their new book, When Colleges Close: Leading in a Time of Crisis, the time to consider merger/acquisition options is not when closure has gone from a possibility to a likelihood, but far earlier, when an institution still has the resources, credibility, and time to engage in outreach and meaningful exploration with potential host institutions.

Board members of struggling institutions must take a hard, uncompromising look at their financials, the reasonable range of future scenarios, and the associated runway projections. They must be honest about how much time is left to act. For some of these institutions, the only path consistent with board members’ fiduciary and moral obligations may be an orderly merger or asset transfer into a larger host institution. As one of my clients has observed, a “transplanted vine” can continue to flourish in its own distinctive way — and the time to consider a new vineyard may be right now.

Judith R. Sizer, a higher education attorney in Cambridge, Massachusetts, has advised more than ten New England institutions on mergers and acquisitions, including Andover Newton Theological School and Wheelock College.

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