There is huge interest at the moment in whether higher education institutions will be more likely to merge with one another as a result of the financial pressures caused by the pandemic.
The Universities UK list of asks to the Government included the important suggestion of ‘A transformation fund to support universities over the next two to three years to reshape and consolidate through federations and partnerships or potentially merge’ (which is realistic but may still have come as a surprise to any policymaker who was hoping mergers might save money).
It is easy to forget how many mergers have happened in the past – though it is not quite so easy if you:
- recognise names in common usage until quite recently, like Queen Mary and Westfield and Royal Holloway and Bedford New College;
- remember places like UMIST or the Victoria University of Manchester; or
- recall how the Institute of Education was subsumed within UCL in 2014.
Anyone who is still in doubt about the number of past mergers should check out this excellent piece by Mike Ratcliffe.
There have also been lots of unsuccessful mergers, and David Kernohan’s recent piece on Wales over at Wonkhe is well worth a read.
So it seems like a good moment to revisit the conclusions of an old HEPI report, first published way back in 2003, when HEPI was less than a year old. Handling Merger Proposals by Nigel Brown, Jane Denholm and Tony Clark looked at various case studies in order ‘to identify those factors in the merger process that led some merger discussions to be abandoned while others led to implementation of the merger proposal’.
Their conclusions, reprinted below, remain instructive today.
We had imagined at the outset of this study that a list of ‘dos and don’ts’ would emerge from the research which would be easily attributable to the successful and the failed mergers. This has not been the case. The same key themes and issues came up in most of the proposed mergers we examined (abortive or successful). The one factor, however, that comes out above all others, in determining the success of merger discussions, is the degree to which there are strong negative push factors forcing the merger. Such circumstances appear to be an incentive to overcome all other barriers. On the other hand, where there are no significant push factors to merger, a wide range of issues can be potentially deal breaking. The most important issues that are potential deal breakers in any merger, particularly if there are no specific ‘push’ factors, we have identified are:
- lack of trust or loss of trust that has been built up;
- perception of differences in institutional culture and failure to produce aconvincing academic vision;
- the position of the two heads of institution post merger;
- changes in key personnel during the process;
- different academic standing of the two institutions, especially concerns about relative performance of the two institutions in the RAE [Research Assessment Exercise, since replaced by the Research Excellence Framework];
- the legal basis of the merger;
- financial or legal liabilities (identified by due diligence);
- the availability of investment finance from the funding councils and external organisations to deliver key aims; and
- the name of the merged institution.
Although we were able to study in depth only a small number of cases, we are convinced that the sample size is not material. It is the combination in which these themes identified above occurred as issues, and their handling within the context of each merger that determined the outcome. Thus, each merger proposal is unique and a subtle blend of issues and tensions requiring skilled handling. Nevertheless, the case studies do in our view allow one to identify the key matters that need to be addressed in taking forward proposals and some of the pitfalls that can be encountered. It may be significant in this context that in the case of at least one case study, both institutions had had previous experience of abortive merger discussions with other institutions. Is it possible that they had learned lessons from that earlier experience that they were able to use in subsequently making a success of it?
The case studies also point to the conclusion that while the kind of processes identified above and successfully navigating the potential deal breakers are necessary conditions for successful completion of merger discussions, they are not of themselves sufficient conditions. The issue which heads the list in determining the success or otherwise of merger discussions, is the degree of common understanding and trust between the key individuals in the two institutions, starting with the Chairmen of Councils or Boards of Governors, key lay Members, the two Vice Chancellors, the two Secretary/Registrars and other senior academic managers. This requires not only some personal chemistry between the key players in the two institutions but above all leadership of the highest order because it involves being able to say:
My duty to this institution requires in this case for me to overcome my natural loyalty and do everything in my power to ensure a smooth transition to merger with another institution so that the new merged institution can develop in a new and better way.
It is also abundantly clear from all our discussions that carrying through a merger proposal is very time-consuming for senior staff and lay members in the partner institutions. In addition the benefits are likely to accrue in the medium term rather than the short-term. Energy and commitment on the part of senior managers is therefore clearly crucial in seeing a merger process through to fruition.
The genesis of, and identified rationale for, a merger proposal is also [a] key factor in its success. Where there are important ‘push’ factors, such as financial difficulties or a challenging external environment, there are incentives to overcome some of the difficulties and obstacles which might defeat a less ‘necessary’ merger and as one commentator has observed ‘there is little evidence to suggest that, except where one institution is clearly failing, the advantages of mergers etc outweigh the disadvantages’ (Brown R 2003).
It may therefore be that in practice ‘deal makers’ are as important if not more important than deal breakers . Where deal breakers can scupper a merger, deal makers can ensure that it takes place despite the difficulties. We suggest, on the basis of the evidence we have seen, that deal makers are almost always negative push factors. Positive pull factors help cement mergers but do not appear to be enough in themselves to guarantee success. Even significant potential financial benefits were not enough to persuade the two institutions in one of our case studies to merge in the end.
We conclude that where there is no impending push, almost anything else can be a deal breaker given the specific circumstances in which institutions find themselves because the push factors are insufficient to get them over the issues.