Colleges Emerge as Hot Market for Mergers and Acquisitions

College football and basketball fans are seeing powerhouse schools like UCLA and USC merge into geographically nonsensical conferences for the allure of bigger payouts. But that's nothing compared to how struggling smaller schools across the country are merging, full stop, just to survive.

Higher education is embracing M&A. The trend will surely be the subject of several grad school theses in just a few years.

M&A 101

One recent deal provides a textbook example of the trend: at the end of June, Boston's Northeastern University acquired the Oakland-based Mills College, a prestigious private women's school. Mills, which was teetering on permanent closure, is a quintessential acquisition target -- a small, expensive, and somewhat lesser-known private school failing to maintain passing financial grades as students flock to brand-name universities and cheaper state schools, or just skip college altogether.

Overall college enrollment fell from 19.6 million in the spring semester of 2011 to just 16.2 million this year, according to the National Student Clearinghouse, pinching small private schools, for-profit universities, and community colleges the hardest. Over 200 schools have closed for good in the past decade, according to The New York Times, roughly four times higher than the prior ten years.

Even Intro to Business class students can explain the economics: mergers provide an easy way to expand an enrollment base, diversify programs, and achieve higher efficiencies of scale. M&A is an increasingly common tactic:

• Ninety-five college mergers have been completed in the past four years, a massive increase over the 78 completed in the prior 18 years, according to data from EY Parthenon. Private and non-profit schools make up 40% of mergers, while the majority of deals involve same-state schools with a student body numbering less than 5,000.
• In the past two months alone, Philadelphia-based St. Joseph's University acquired the neighboring University of the Sciences, while Boston College announced a deal to acquire Boston neighbor Pine Manor College.

YouTube University: Many universities will likely continue to struggle as both laborers and employers embrace alternative avenues of post-high school education. Over 10% of Americans in low-wage hourly positions have upgraded to highly skilled tech jobs in the past two years, according to a large survey by consulting firm Oliver Wyman. And they're doing so without student loans. Major tech firms are increasingly open to cheap, highly specified online course certifications as acceptable qualifications for new hires. Who needs boring lectures when Google can teach you anything?