Horizons Fall/Winter 2020

An M&A transaction could provide a school with access to a particular type of student that would not have previously considered the institution. M&A have also taken place to acquire access to technology platforms that are more scalable or reach students previously unable to connect with a particular school. For students and administrators, M&A transactions can provide more offerings than would otherwise be possible. M&A activity can result in efficiencies that lower expenses. A high profile acquisition took place in April 2017 when Purdue University acquired Kaplan and called the new organization, a nonprofit, “Purdue University Global, Inc.” Purdue made the acquisition for many reasons, including increasing their access to adult students, improving the institution’s online reach, and to provide a defense against industry disrupters (such as Udacity, Coursera and the Kahn Academy). The deal resulted in Purdue receiving praise that was at least partially pegged to the future performance of the program. In fact, that acquisition model is currently being replicated by the University of Arizona. In early August 2020, the University of Arizona announced its intention to acquire a for-profit school, Ashford University. Similar to what Kaplan brought Purdue, Ashford brings a platform that is attractive to adult learners as well as a strong technology platform. Also similar to Purdue University Global, Inc., the University of Arizona set up a nonprofit company called the University of Arizona Global Campus, and the deal is structured to compensate Ashford, at least in part, based on the future tuition revenues, which reduces the risk for the University of Arizona. M&A activity in higher education has a certain set of obstacles to overcome. The Department of Education has to approve M&A activity, which can be a challenge.

The potential benefits of M&A transactions can be attractive for schools hoping to thrive in the future.

There are also aspects for institutions to consider such as to what extent a

distinct identity is maintained for the previous institutions, as well as issues around space, credit hour transfers and differing degree requirements. As schools continue to consider their future, we expect increases in M&A in higher education. Although lessons can be learned from prior activity in the industry, every transaction will have unique differences and challenges that may arise.

COLLEGES & UNIVERSITIES SERVICES

The Colleges & Universities Services Group provides a full range of assurance, consulting services and tax to colleges and universities. Our specialized services and expertise are delivered with close personal attention to our clients.

Corey Robinson, CPA Manager Colleges & Universities Services 816.859.7943 corey.robinson@rubinbrown.com Chester Moyer, CPA Partner-In-Charge Colleges & Universities Services 816.859.7945 chester.moyer@rubinbrown.com

Fall/Winter 2020

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