Giving Compass' Take:

• The author explains the differences between merger models in the context of higher education institutions.  More and more colleges and universities are looking to consolidate in order to bring more innovation and value to students' experiences. 

• Will consolidation actually help bring about change at these institutions? Should students be involved in the decision-making process of something like a merger? 

• Read about what innovation themes are happening now in higher education. Will merging help or harm innovation? 

Deal fever is slowly creeping into higher ed. According to research from TIAA Institute, there have been 24 mergers in higher ed during the last decade, more than double the pace of the preceding three decades.

Is consolidation the answer to what ails higher education? Could merging institutions lower costs and unlock value for students, society, and institutions themselves? Can acquisitions make colleges more innovative? Higher ed isn’t the first industry to ask these questions, and innovation theory has some answers that could help colleges think through their strategic options.

The first type of deal—”leverage my business model”, or LBM—is more common, and typical ways of boosting the current business model include cutting costs or increasing scale. In higher education, these often include deals that allow institutions to merge and streamline administrative overhead or acquire new space to expand profitable offerings. LBM deals rarely make big headlines, but if done well, they can help struggling colleges to improve their offerings, and they can help successful colleges to grow.

In LBM deals, organizations are essentially buying resources, which include people, facilities, brands, and financial resources.

The second type of deal—”reinvent my business model”, or RBM—is far more rare, both in higher education and in other industries. In RBM deals, organizations aren’t pursuing a deal in order to augment their business model; they are seeking to build an entirely new one. For this reason, RBM deals demand an entirely different post-acquisition strategy: rather than integrating the organizations in order to achieve synergies, the two should remain separate and distinct.

For far-seeing, well-resourced, traditional institutions, RBM deals offer a way for them to successfully ride the wave of disruption. Pursuing disruptive strategies inevitably requires organizations to create autonomous units.

Read the full article about higher education mergers by Alana Dunagan at Christensen Institute