Is Higher Ed Poised for Mass Consolidation?

Podcast

Is Higher Ed Poised for Mass Consolidation?

Episode 66. August 10, 2021.

Welcome to the Office Hours with EAB podcast. You can join the conversation on social media using #EABOfficeHours. Follow the podcast on Spotify, Google Podcasts, Apple Podcasts, SoundCloud and Stitcher or visit our podcast homepage for additional episodes.

EAB’s Kaitlyn Maloney and Jackson Nell examine the higher education market to determine whether there is an oversupply of providers relative to the number of consumers who want a college degree.

Their team has examined decades’ worth of M&A deals to highlight trends in consolidation activity, motivations among buyers and those being acquired, and types of partnerships that offer advantages over outright mergers.

They also offer tips for institutions looking for partners to stave off closure or merely to fill gaps in their program portfolios.

Transcript

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0:00:12.3 Speaker 1: Hello, and welcome to Office Hours with EAB. On today's episode, we look at M&A activity across higher education and explore reasons why these marriages of convenience are viewed very differently from mergers and acquisitions in almost any other industry. Our guests offer tips to schools looking to make acquisitions to fill gaps in their current program portfolio and to schools whose very survival may depend on finding a partner with deep pockets. Thank you for listening and enjoy.

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0:00:49.5 Kaitlyn Maloney: Hello everyone, and welcome back to Office Hours with EAB. I'm Kaitlyn Maloney, a senior director on our research team, and it's great to be back on the pod. Today, I'm joined by my colleague and friend Jackson Nell. Jackson, thank you for joining us today.

0:01:05.1 Jackson Nell: Thanks Kaitlyn, it's great to be back with you. I feel like every time we have great conversations, so looking forward to another one.

0:01:10.9 KM: Yeah. And we've got a really exciting and timely topic to discuss today, consolidation in higher ed. What's going on with mergers, acquisitions, closures. They've been spiking in the news lately. Prior to the pandemic we saw big news from Purdue and the University of Arizona, both, by acquiring large for-profit providers. We saw the PASSHE system announce a large-scale consolidation at the system level. More recently, we saw Northeastern University announce that it's acquiring Mills College all the way on the other side of the country in California. So lots going on, lots to unpack. And Jackson, I know you've been following the news quite closely and leading EAB's analysis of industry consolidation. I've got a lot of questions that I wanna ask about that analysis. But before we get into that, can you explain what M&A looks like in higher ed? I suspect that it works a little different than other industries like technology, let's say.

0:02:08.4 JN: Absolutely, it does look very differently. And I know you and I have been following closely all of the deals, we keep track of everything, and every time there's a big announcement in higher ed, we make sure to share it with each other in comments. So, this is certainly, I think a space, Kaitlyn, and I spend a lot of time thinking about. So in terms of just giving kind of a general landscape, I think it's probably helpful to throw out a few terms just to define them for folks online, given this isn't something that a lot of us are used to thinking about. When we refer to industry consolidation, generally what we're talking about is the shrinking in the number of distinct and independent institutions, that can occur primarily through one of three ways. The first is mergers, where institutions essentially combine and pull their assets. The second is an acquisition where another institution buys another or buys pieces of another. And then the third is closure, which I think we all know and are very afraid of, rightfully so. So those are the three pathways here. And then within higher ed, I think there are kind of two flavors or two kinds of extreme ends on the spectrum.

0:03:09.2 JN: There's the system consolidation, which is essentially an agency reorganization process and in its extreme form it's a very political, very policy and state support-driven conversation, so it looks very different from a pure market-based kind of M&A deal that we see often in the for-profit higher ed space, for example. So most deals within higher ed are gonna fall somewhere on that spectrum, and probably a little bit closer to the agency reorganization model than that true equity-based M&A model that you see in other industries. But that hopefully provides a little bit of landscape and color to what this looks like.

0:03:46.6 KM: It does, and I think it's worth reminding listeners, a lot of people don't realize just how big the higher ed industry in the United States is. There're over 4000 distinct higher ed institutions in the US alone. And that's a lot larger than other countries, far more institutions per student than in Canada, in the UK, let's say. And also much larger than we see in other industries. I think Telecom, Airlines are the extreme here, but if you think about the number of institutions available to serve each and every, let's say, consumer in this case, there's quite a lot of institutions, so it raises valid questions from industry observers around. Is it time to shrink down? But of course, the industry has been this size for a long time now. What's driving increased interest in M&A as of late? What are institutions looking to solve all that through conversations right now?

0:04:40.6 JN: Yeah, a great question. And I think there's a lot of forces percolating up through our industry that are driving M&A to the forefront. I think two stand out and they are the two that I think, pretty much every university leader could connect. One is, the demographic decline and stagnation, to the point that you just made, Kaitlyn, about there being an over-supply of institutions already. Yes, when you look at us versus our kind of OECD peers, that's very much true, we have more institutions per students than any other country, and that's accelerating as we think about the demographic declines that we're already starting to experience and are going to experience more as the decade progresses. So a lot of institutions are saying we're over-supplied, and so that is leading to some speculation that particular markets and regions need to consolidate to essentially better serve and rightsize themselves to that market. So that's the first force. I think the second is the broader concerns about financial sustainability, particularly on the cost side. We know that cost growth is occurring at a faster rate than revenue growth in the higher ed, and that's an increasingly precarious dance that we're on. And from that standpoint, I think there's an interest in using M&A as a way to drive economies of scale and efficiencies to drive down those students service costs, for example, and then to allow us to kind of provide a better financial footpath for our institution.

0:05:57.2 JN: So those are the two forces there. More specifically, I think on the sell and buy side, those are a little bit more nuanced. On the sell side, we are looking at institutions generally speaking, who are looking for a physical alternative, essentially. They're looking for another institution to provide a bailout via a buyout essentially. They're close to insolvency or on that path to closure, and this seems to be a way to provide a kind of continuity of that institution going forward. So that's where we see a lot of the sell side interest. However, on the buy side, it tends to be skewed to institutions looking at revenue diversification and revenue growth, looking to enter new markets, whether that's geographic markets or kind of student to consumer and credential markets. And so that's a lot of the activity there. And so you can see those are very much asymmetric, and certainly, I think one of the reasons why higher ed M&A looks the way that it does and why the level of activity is rather scattered.

0:06:54.2 KM: Certainly, and a lot of the factors that you described, do you know, they're not new, they're things that the industry has been grappling with for a while now at least since the Great Recession, but of course the events in 2020 and the ongoing effects of the pandemic have amplified, I think, some of these stories in the media with the closures, the consolidations, are getting a lot of probably disproportionate media attention from critics who are quick to point out the flaws in higher ed's cost model and cost being passed on to students and student debt, and those factors. What's really going on? Has M&A activity increased dramatically in the past 10, 15 years as the industry has faced these pressures, or have we seen M&A and closures throughout higher ed's history?

0:07:40.4 JN: Right. And that's a tough one to answer, because there's really no central clearing house of data when it comes to the deals that are occurring. So a lot of what we have to do is stitch together or a good theory of the case of what's going on here based on the evidence and what's publicly available. It's also important to caveat that a lot of the deal activity occurs sub-institution, so think of one institution's School of Business buying another School of Business from another institution, for example, those are very hard to track but are part of the conversation here that we say. But to your question about the level of activity, I think our best guess is that somewhere between six and seven on average deals occur each year over the last decade. And so that is up about double of what it was the decade prior. So speaking to some of the broader trends and distress that we talked about earlier, there is some evidence that M&A is escalating and accelerating, as a result.

0:08:37.3 JN: But that being said, I think it's important to couch that number to the point that you said earlier when we're talking about 4000 some institutions here, M&A is touching 0.28% of those each year, so very small amount of deal activity occurring in the grand scale of our industry, and you compare that to virtually any other, it's remarkable how small the level of activity remains versus the size of the market. And I think going forward, we'll continue to see M&A accelerate, but we're not talking about huge cascades of deal activity emerging at any point, there's likely that gradual uptick, but not the waves that I think some have forecasted.

0:09:15.1 KM: Yeah, and six or seven a year that you mentioned, that's even counting for-profit institutions, which brings the volume of the grand number of higher ed institutions in the US to actually over 6000 when you include for-profits in that pie, so six or seven a year is really quite a small level or low level of activity here.

0:09:36.9 JN: Right. And the for-profit space has a lot of consolidation forces in it. That 6.7, on average, refers just to the non-profit of public space.

0:09:45.4 KM: Okay.

0:09:46.3 JN: So that's the nuance that I would say there. But of that number, 30% of that is system consolidation, so that's the big driver. So you can get some big spikes in some years when a particular state like Georgia, for example, says we're going to do this big system-wide consolidation, and so that's a big driver and it's hard to really factor that in. So some years you'll get a big spike just for that reason alone.

0:10:10.5 KM: That makes total sense. So, why has that number remained relatively low despite all of the speculation and emerging interest? I'm shocked it's as low as that, as it is.

0:10:21.1 JN: Yeah. I think generally, I think the activity remains relatively low because so much of higher ed's value proposition and its asset class is relatively un-fungible, and often intangible. So we think about real estate, for example, which is a large component of most institutions assets, it's very hard to drive scale through M&A through the real estate deals that we see. It's just very hard to control the cost curve on that side, it's really hard to drive economies of scale and revenue growth as a result around that. And there's so much value unlocked in an institution's brand and its alumni network, and its employer partnerships, those things are hard to price, let alone hard to integrate with another institution and drive the scale and the added value that would occur there. And so a lot of that jargon that I'm sure business teams on the line are thinking about right now, and that I'm using entirely wrong, doesn't necessarily apply to these conversations in the same way they do in private enterprise, because so much of the asset class is just hard to control on that front. The other thing I would say is, is that on the speculation and frothiness that we see in the private markets, that doesn't exist in higher ed. There's no individual ownership of institutions in the non-profit in public space, so no one gets rich from M&A.

0:11:36.8 JN: There's no Carl Icahn and activist investor class really driving up those valuations, so the pressures are generally relatively weak, if nonexistent at all. And so from that standpoint, I think the incentives tend to be poorly aligned, and for good reason. I don't think any of us want our institutions to be equitized in the same way that we see a lot of companies, were serving different missions in different constituencies.

0:11:58.5 KM: Yeah, so misaligned incentives and I'd argue just disincentives. When you look at the politics involved, thinking, and I mentioned Northeastern and Mills, I just saw Inside Higher Ed today, have an article about their alumni and board suing, pushing back or some of their alums suing the board, that the financial circumstances didn't require of them to go this far as to sell the institution, I know we saw the same thing with Sweet Briar years ago, and so I'm sure just looking at some of the accounts of how this unfolds with the alumni community in many instances in higher ed, that might actively deter higher ed leaders from going down this road.

0:12:40.5 JN: Right. And I think too, if you're in the business of relationships, that higher ed it really is in, it's hard to disrupt those relationships and doing so has consequences. And so, one of the reasons why M&A doesn't accelerate is because there's all of these sticky but important components of our business models.

0:12:57.7 KM: Sure. So not that many instances of M&A or closure every year, but you have, I think you and your team gone back and analyzed every single M&A transaction that has been recorded in the higher ed industry since 1899, am I getting that right?

0:13:16.1 JN: Yeah, 1830 is the oldest one we have in the database, which is just extra quite frankly, but we want it to be thorough to say the least. And to understand it and contextualize M&A in the context of being a natural part of higher ed throughout its history in the US. But no, and to the point that we talked about earlier is just that it's very hard to taxonomize and track the deals that are occurring in the industry because so many of them are submerged, very small niche, and the deals that you do get are hard to sort through. So there's some good sources out there, one of them is actually, Wikipedia, which tells you a lot about the quality of data that we're using right now. So, we designed this database to really try and encompass somewhere between 95-99% of the deals that we felt had occurred, and so that was a very thorough exercise and we built this database that allowed us to categorize the deal activity under way, and then run some analysis on the backend to look at the financial and enrollment results to get a better sense of what the ROI or what was produced by the deals themselves.

0:14:18.5 KM: Yeah. Hat tip to you, that's quite the exhaustive effort, and I'm sure we'll have some data wonks on the line that would love to get more into your methodology and see the data. We are happy to do that if you get in touch with us, but I think most of our listeners are probably more interested in what can we learn from all of this M&A activity that is taking place across the past two centuries at this point nearly. Can you give us some high-level lessons what you could glean from your retrospective analysis?

0:14:49.6 JN: Yeah, and I think we'll probably focus on the last 20 years, 'cause if you go too far back, it's probably ancient history for most of the folks on the line, so we can look at the conclusions there. And I think generally, we bucketed our conclusions out of the analysis that we ran in terms of false starts, areas that we expected to see activity based on the hegemonic narrative of the day, and we didn't find it. The second bucket is those real opportunities spaces where there were activities and pretty substantial amounts of up-market interest, and then finally, I think the lessons learnt, things that we took away as what happened ex post facto, what happened after the deal from an implementation standpoint. So let's start with those false starts, I think here, the first one was, generally speaking, we don't see a lot of interest in these bailout via buyout deals. I think a lot of the narrative here is that these big, well-resourced schools are gonna bail out some of these small and struggling institutions. And there are a handful of examples, I think of Boston University and Willock, for example.

0:15:47.1 JN: But generally speaking, when you look at the data, those are very rare deals, and it makes sense from that standpoint. I think the well-resourced institutions don't have a lot of incentives to buy struggling institutions. The value proposition and the revenue proposition is very weak there, and they also can achieve their growth independent of those institutions. So for the most part, what deals do occur there, tend to be essentially real estate deals or a very particular kind of mission or partnership formation. Generally no appetite for bailout via buyout. The second place of false starts is, I think there are few deals of true equals. I think a lot of us would expect that what's happening in the market is institutions that are very similarly oriented in terms of mission and moment, even geographic region would be combining to take over all of the Catholic students in Pennsylvania, for example. That's actually something we don't see quite frequently.

0:16:38.5 JN: What we do see instead is actually highly asymmetric relationships and partnerships between the buyer and the seller, essentially. They tend to be, again, to the point that we talked about earlier, seeking revenue diversification and strategic diversification, and to do so you're not gonna buy someone who looks identically like you, you want a different type of institution, different market serving forces underway. And so a lot of these deals tend to be schools that are serving different market niches, as I mentioned earlier. So, that's a big space that I think we expected to see a lot more activity, but generally found not a lot of examples of institutions of similar size composition, orientation, combining themselves.

0:17:19.2 KM: Those are really good lessons to share with higher ed leaders, I think we often see a lot of interest, or at least a disproportionate amount of interest from smaller, more regional institutions who are being hit hardest by some of the financial and enrollment challenges that you described, so, I guess both of these apply to them most acutely. But not a lot of appetite for a larger institution to come in and buy them unless they're in a geographically attractive location or have some special program, special real estate that make them attractive. And then also that even if they're in an area with lots of other smaller sized institutions, they might not have the finances or the value proposition to make attractive merger candidates.

0:18:05.7 JN: Right, and on the other side of that too, your very well-resourced prestigious institutions have no incentive to do this either. Harvard and MIT are never going to merge. Can you imagine how scary that would be for our industry if that happened? But it's never going to, right? If this was another market, another industry, that could be on the table, for sure, but that's just not how our industry operates, from distinct identities, values, all of the other things that are at play, there's a lot more rivalries and I think submerged structures in our industry than are often appreciated.

0:18:36.0 KM: Yeah, rankings, selectivity, absolutely. What about real opportunities? So I hate focusing just on squashing dreams and saying where there's no real movement, where are the opportunities for institutions that are interested in growing or gaining scale?

0:18:54.5 JN: Right. Well, one, I don't know if the first one is one that I don't know many institutions actually want to be a space of opportunity by that is system consolidation. I think for a lot of the publics here, and particularly I think of the folks in Pennsylvania right now, this is a very difficult process, and it is really driven from the top down and the state legislature and the governance structure of a particular system, but this is a space that we see more and more states exploring and over the last decade has certainly accelerated, it is very cyclical in the sense that it tends to follow recessions or fiscal crunches from a budgeting standpoint, so these conversations often start and then stop and then are restarted later if the politics have changed or the finances have changed, but this seems to be a space going forward where we expect there to be more activity just given the kind of increasing polarization around higher ed and the desire to break down or at least control state funding and support going forward. So that's a space that I think you'll tend to see activity.

0:19:51.9 JN: The other is, I think in buying your way into new markets, we talked about this earlier from a buy side, there's a lot of interest instead of building your own adult and grad offering, for example, potentially buying someone who already has that essentially, or niche accreditations or niche infrastructure and programs that we see a lot of folks doing, for example, a nursing school, those tend to be things that folks may wanna buy to build out their portfolio or access the new market instead of starting from scratch to do so, so that continues to remain a very fruitful one, and relatedly actually is some interest in buying for-profit institutions, and again, this isn't for everyone by any means, but we've actually seen several high profile deals here in recent memory, Purdue Kaplan is of course, I think the most famous at this, where institutions looking to grow big in the adult and grad space are looking for a lower cost instruction model, and that tends to be, or at least perceived to be in the for-profit space. There was also a desire to access their distribution in the marketing networks and to drive those student acquisition costs down, and so that seems to be a driver to turning to the for-profits for some institutions to access new markets or to really position yourself for big scale there.

0:21:03.6 KM: Right, I was going to say, and since it's Purdue Kaplan, there are kind of two of those opportunities, you highlighted it was for-profits as acquisition targets, but the end goal was to buy their way into the adult and online market, just by buying the institution, getting all of those students, the marketing, the assets were able to reach so many more students much more quickly than trying to build their own house, in-house.

0:21:29.2 JN: Exactly. And especially given how consolidated already the adult and grad space is, particularly in the online environment, it's very hard to go it alone and do it in a kind of a piecemeal or a sample ice fashion, and so they really had to accelerate, and I think that was the solution and then you saw U of A and Ashford basically copy that. And so there probably could be potential opportunities for other large providers there, but I still think though that that's a rather niche and small market for most institutions.

0:21:56.1 KM: That makes total sense. And we've done a lot of research on the growing concentration in the adult education market, we can link to in the show notes for those that are interested. Well, let's talk about lessons learned, so we know where the opportunities are and where they're not, what would if you were to speak in the voice of presidents or folks that have led some of these efforts on campuses that have gone through this, what are the lessons learned?

0:22:22.4 JN: Yeah, I think the first one is, there's kind of this misperception in higher ed that these deals are essentially free, sometimes, like no one pays much for some of the deals between merging institutions, for example, but what tends to happen is there's a very large implementation cost burden that's carried here. Everything on the frontend of doing the due diligence, going through hiring consultants, lawyers, auditors, all of those things is expensive to do, and I think most expensively is actually the tech implementation, integration of staff and faculty and processes. You know this better than I do, Kaitlyn, when just how cumbersome that is to do even within a single institution, let alone two, that often may be in an adversarial relationship between their faculty bodies or staff bodies, for example. So, those tend to really pull on, I think the value return of a lot of M&As if not erode it fundamentally. So we've heard of multiple examples of where M&As were executed over a decade ago and still really haven't been fully integrated yet, and that speaks to some of those big challenges that occur there.

0:23:28.3 JN: And relatedly, I think that the kind of second lesson learned here is that the financial and enrollment results of the deals that have been executed on so far tend to be rather weak system consolidation, for example, the cost savings have been historically insignificant, and when you look at the grand scale, probably because a lot of those system consolidations actually haven't closed campuses, they made have consolidated backend administrative and leadership structures, but they still have kept the large real estate and the large staff portfolios for political reasons and others, and that has tended to really erode some of the cost savings that could have been achieved there. And on the revenue standpoint, there's not a fundamental change in a lot of these deals to the value proposition for students, and so there's nothing that's really driving a transformational opportunity for enrolment growth in most cases, and so that tends to be something that we see as on the downside, the other thing is, is a lot of these deals carry large debt loads, there's a lot of liabilities, they're solving to important maintenance backlogs, there's all of the things that are associated with pooling two institutions, often two institutions that may not be fully thriving in the first place that are gonna erode and eat at some of the ROI there and potentially worsen the deal, though there are some exceptions, but generally speaking, that has held up in our analysis.

0:24:43.9 JN: And then finally, when we think about these kind of existential threats that higher ed is facing today, everything from the student debt crisis to controlling the long-term cost growth that we see, there it really doesn't seem to be kind of a standalone solve to many of these, if not, kind of counterproductive to them, I think about student debt and access, for example, and the data suggests that following M&A activity, you actually see tuition prices and student fee prices rise 5-7% post-deal, so rather than controlling or plateauing costs for students, they can actually lead to an uptick, partly to cover those implementation costs, and so as we looked at this and we thought through all of the kind of challenges our institutions are facing for the most part, M&A is not gonna be a stand-alone solve, it can be part of a broader portfolio for some institutions of solutions, but generally speaking, it's secondary at best to the threats of today. So I think those are the three core lessons learned, there's many others, but those stand out to me.

0:25:38.3 KM: Yeah, in a nutshell, lesson learned is, this is hard, it's complicated, and it sounds like the institutions that are most successful are pursuing it with a really clear strategic goal in mind, not just looking for a life raft or a bailout here, really thinking about how they can use a merger and acquisition to expand their service to students, advance their mission, expand their market share in certain capacities. I did wanna touch on in addition to M&A closure, that you mentioned at the beginning, another form of consolidation, in a way consolidation happens in the higher ed industry, created a lot of buzz and scary predictions about mass closures in recent years here. What's happening there? Did we see a major uptick in closures because of the COVID-19 pandemic as some initially predicted?

0:26:29.6 JN: Yeah, this is a tough question too, in the sense that closures are hard to capture as well, and a lot of the activity here is not tracked coherently. But I think our best guess which is, in the last decade there was a slight uptick in closures, yeah. We're talking about 10.6 or so non-profits on average closing each year, so that's a scary number for sure. When you look at all of the closures generally occurring in higher ed, about 75% so far have been the for-profits. So these are not institutions that look like most of our partners by any means, and even within the schools that have closed in the non-profit category, most of these tend to be very small and specific players that don't look like a traditional regional comprehensive institution. So in some sense that's a bit reassuring, but going forward, I think it's very much likely that number will continue to uptick. Again, I don't see it going to a point where you're getting dozens and dozens of schools closing each year. Demographics aside, I think generally it will still stay north of 10, but not close to 50, is probably the best guess that we have on that front.

0:27:37.0 JN: And this past year, to your point about COVID, I think many of us last spring, when we were thinking about the liquidity shocks that were occurring across higher ed, the fear that the fall semester would essentially result in zero auxiliary revenue for some institutions. There's a lot of fear that we could see hundreds of schools essentially go into insolvency and close. But we didn't see that at all. In fact, last year's data was actually at the baseline closure pre-COVID. We didn't see a big uptick and see a noticeable spike. I think a large part of that is something that you and I, Kaitlyn, spent most of our last year and a half talking about, which is the Higher Education Emergency Relief Fund, which really helped solve some of the liquidity challenges for institutions. And for some of the smaller schools, the ones probably most exposed to closure, there was also the Paycheck Protection Program last spring that helped keep the lights on for a lot of them. I think the fear, though, is that we're gonna see closures spike in the recent years, because as that federal stimulus kinda wears off that sugar rush, so to speak, you have a lot of institutions that have been essentially zombified where they don't have a path to growth, but they have been able to keep the lights on financially at least, and once the kind of market resets, then they might not be able to find a pathway forward anymore.

0:28:48.4 KM: Okay, got it. And we've talked a lot about mergers, talked a lot about closures, mergers, hard, maybe not opportunities for every institution, so we look across the next decade and see these financial headwinds that schools will be facing. Are there alternatives to closure or mergers that schools that are struggling to scale costs or services can consider?

0:29:11.1 JN: Definitely, and there's a whole playbook that EAB has here on the sides, and on the cost side. But I think one thing that's often under-appreciated is the inter-institutional partnerships, the various kind of flavors that exist for institutions to achieve. I think many of the same goals that M&A is designed to achieve, cost scalability, revenue diversification, revenue growth through these forms of partnerships, and there's quite a spectrum here. I think most of us are probably familiar with consortia, these are kind of the backend procurement, administrative-focused services. But what we're starting to see is really a lot of emergence of new types of partnerships in the middle between M&A and consortia that we call strategic alliances, which are much more embedded and integrated collaborations between institutions on revenue generation, often, or on student incentive services. And so, that ranges from everything from the Colleges of the Fenway in Boston who basically share a lot of student support services to TCS education system, which is collaborating on admissions and marketing. There's a lot of, I think, potential and fruit in those areas, and so we already see a big uptick, and I think, schools are exploring that space.

0:30:17.3 KM: And in addition, we talk a lot about scaling costs and making a financial model work. But I know schools like the Colleges of the Fenway, see that it makes them more attractive to their students too. They're in Boston, they've gotten Northeastern, BU, BC down the road. By collaborating these five smaller institutions, they're able to have bigger and better music programs, athletic teams, theaters, all the amenities and extracurriculars that a lot of students are looking for as it comes to the student experience. Jackson, I know we are nearly at the end of our time together, I'd love to end just by asking, what advice do you have for anyone exploring M&A at a higher ed institution?

0:31:00.4 JN: Yeah, I think for everyone, it's a point that we talked about earlier, it's really leading with student value creation. I think often M&A deals become all about institutional success, which is an important goal, but really thinking about what value is created in the deal or partnership for students, that's going to better position yourself from an involvement standpoint. I think it's essential. And it's one that's often hard to think through, if you're talking about how do we build shared benefit services. Going back to the student, it's the best thing we can say there and having a very clear investment thesis tied to it. I think the second for our buy-side, or excuse me, our sell-side institutions, it's really to start this dance earlier than many may think. I think there's often a hesitancy to admit that closure is in our future, and we always wanna fight on as institutions. But if you really feel that M&A is part of your list of strategic alternatives or a pathway that your institution may explore, you really need to have those conversations earlier than you may feel comfortable. Often three to five years before the point of closure is the way to best position your institution to think about how you can make yourself an attractive partner for another institution, and avoid potentially taking on higher debt loads, letting some of your deferred maintenance and other challenges exacerbate, that will make you less attractive from a buy-side standpoint.

0:32:14.6 JN: I think for our buy-side institutions, it's really not being too opportunistic, I think a lot of folks sometimes have told us, "Oh, look at all the schools that are going to close and look at what we could buy." The strategic clarity, to me, is not always there. I think it's often a good check on folks to say, "Why would a very successful institution or thriving institution, right now, explore M&A?" It often can lead to a strategic quagmire or distraction, so I think checking the value proposition from the buy-standpoint is important in not getting opportunistic as deals kind of surface or as folks who talk to you. And then finally for everyone, really weigh those alternatives to M&A when it comes to those inter-institutional partnerships. These often allow schools to provide kind of a sandbox to play in the collaborations with another institution, to test value propositions and then again, achieve a lot of the similar goals that you would want in an M&A through greater scale. So those are, I think, the great core pieces that I would say. Of course, there's a lot we could add on that, but those stand out to me.

0:33:15.1 KM: Jackson, this is a fascinating space. I think every single M&A activity or closure that we see, bears its own set of lessons to learn, new opportunities to explore, so we will certainly be monitoring this space further going forward. But until then, it's been a pleasure to have this conversation with you. We thank everybody for listening. And hope to speak with you again soon.

0:33:38.6 JN: Thanks everyone.

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0:33:45.9 Speaker 1: Thanks for listening. Be sure to join us next week when we examine ways to blend the best aspects of virtual and traditional in-person engagement activities to boost yield. Until then, thank you for your time.

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