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Where to Start with Mergers and Acquisitions? Three Considerations

By Jeffrey Shields posted 04-09-2019 08:30 AM


CEO Notebook |

Conversations around school mergers have shifted from reactive to proactive. It’s not about failure, but rather preparing for the future.

jeff shields
Jeffrey Shields, FASAE, CAE
NBOA President and CEO

This year’s spring fever has an unusual theme. Instead of the typical hiring decisions, financial aid negotiations and end-of-year fundraising gala preparations, some schools are discussing the opportunity to merge or acquire other schools.

We have heard about school mergers before, but I think the ground has shifted these past few months. Why? Because schools are approaching the opportunity differently. No longer is the predominant framework that a financially struggling school asks a better positioned school to merge, with the decision in the stronger institution’s hands. The conversations are proactive, with mergers discussed as financial and strategic levers, much like taking on additional debt or expanding the school’s preschool-grade 8 program to include an upper school. 

Hearing from more schools wanting help in this arena, I reached out to consultants, school leaders and my network of nonprofit colleagues who have done the hard work of merging two separate organizations into one. Here is what resonated with me the most from these conversations:

  • This is a people-first process, not a legal or financial one. Nonprofits and independent schools — which I endearingly refer to as “the ultimate people business” — may think to call a lawyer immediately with the first notion of a merger. According to those that have been down this road, however, that may be premature. They tell me it is essential to focus first on the people and the cultures involved. The legal, financial and tax implications all have their place (and look to NBOA for more on this topic), but it’s generally not at the start, because they are not what will ultimately drive a merger’s success. Rather, each school may want to take a step back and figure out what it wants from the merger. What aspects of the current organization cannot be sacrificed? Where are the organizations already aligned? It’s critical for your school leaders to understand their own culture and value proposition, as well as the other school’s, before even considering business implications.  
  • Test small collaborations if possible. As one individual put it: “Perhaps the two organizations should try dating before they decide to get married.” In many of the scenarios of which I’m aware, the schools enjoy geographic proximity and complementary programs or at least the potential to explore programmatic partnerships. This step allows leadership teams to develop a deeper understanding of each other and test how the school cultures may perform as one.
  • Focus on the ways a merger or acquisition could facilitate the delivery of your school’s mission. At the end of the day, our responsibility as leaders is to ensure the school’s mission is delivered in perpetuity in a financially responsible and sustainable manner. That brings me full circle. Let’s dispel the notion that a merger is about failure. It is precisely the opposite. It is about strengthening what is with what could be. For leaders to have the fortitude and vision to reconsider their affinity to their school in its current iteration and lean into their school’s mission and long-term success is perhaps a school leader’s highest calling.

Is a merger and acquisition right for every school? Of course not. Could it be a viable opportunity for some to consider? Absolutely. I hope the last ten years have taught us that one size does not fit all and there is no silver bullet to questions of financial sustainability. As we all explore the best business decisions to ensure our schools’ viability and success, this may be the right opportunity for some, and my hats are off to school leaders that are proud to own it and pursue it in the best interest of the missions, students and families they serve.

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Follow NBOA President and CEO Jeff Shields @shieldsNBOA.
From Net Assets NOW, April 9, 2019. Read past issues of CEO Notebook.


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04-25-2019 06:18 PM

Jeff shares some great insights here, and I think the emphasis is right on.  M&A and collaboration can be the smart move for healthy, aspirational schools.  My work with schools on financial and enrollment sustainability and pricing has opened the door to these conversations.  The focus on mission is critical.  When the boards I work with as a M&A Advisor focus on broadening mission impact, collaboration is often a natural path.  I look forward to deepening this conversation.