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Seize the day: is now the time for UK universities to explore collaborations and mergers?

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Seize the day: is now the time for UK universities to explore collaborations and mergers?

The world is changing faster than institutions can organically. Mergers, acquisitions, joint ventures and other forms of significant collaboration might now be a much more tempting proposition for the UK's universities if they want to turbocharge performance. Rather than tinkering around the edges, more transformational moves promise an opportunity to leapfrog peers and drastically change the UK higher education landscape.

Universities face a multitude of threats, from increasing regulation, domestic and global competition, and the rise of alternative delivery modes. They're under pressure to grow budgets while pushing to do more with less. It's in this context that a step-change in institutional form looks attractive, whether through structured collaboration, joint venture, federation or merger.

Nous recently convened discussions with the chairs of governing bodies, vice-chancellors, deputy and pro-vice chancellors and chief operating officers from UK higher education institutions, to explore current thinking on the topic. In our soundings, we identified four common themes.

Many are considering, but few are acting

Institutions tend to be cautious, rather than enthusiastic, when considering whether a collaboration, joint venture or merger might be the opportunity they need to better position them for the future.

Many have concluded that their current composition of disciplines, scale and geographic footprint is not ideal to deliver their strategy. Most are considering what to grow or trim organically but acknowledge that this can be too incremental to keep pace with the competitive and challenging environment.

Like all major strategic decisions, universities can better target these opportunities if they have a sharp sense of their own criteria:

  • What would complement their education and research offerings?
  • What strategic and financial assets are most significant or need bolstering?
  • What is the culture of the institution and what other cultures might complement it?

If not mergers, then joint ventures or other structured collaborations

Many UK universities are smaller than their international competitors: mergers and collaborations can be a way of challenging larger providers. For many universities, mergers could deliver a step-change in market presence and reputation, in breadth and depth of institutional capability, in campus optimisation and in resilience to disruption.

These factors all present opportunities to benefit students, staff, collaborative partners and other stakeholders. For smaller institutions, a merger can also represent a pathway to substantial efficiencies in education, research and professional services. Finally, mergers can trigger renewal – an opportunity to break through entrenched practices and barriers to future success.

However, universities also recognise that mergers require a very high level of institutional imagination, courage, detailed analysis and outstanding leadership to ensure the long-term benefits outweigh the near-term costs and risks. In the UK, there are many more stories of mergers not getting out of the starting blocks than of mergers completed.

Unsurprisingly, many universities are actively pursuing smaller, more manageable collaborations. We have seen many UK universities searching for and establishing joint ventures. Many institutions already partner with private companies for online programmes, student accommodation and other facilities.

There are lots of joint campuses, within the UK and abroad, and research network collaborations across disciplines. Significant examples include the Francis Crick Institute, which brings together three London heavyweights in biomedical research – Imperial College, King’s College and UCL – along with the Medical Research Council, Cancer Research UK and the Wellcome Trust to create a global research giant.

In such cases, universities have realised that combining their discipline, brand and/or geographic strengths with those of complementary partners can enable them to realise aspirations that would otherwise be out of reach. Moreover, joint ventures are typically an easier way forward: while significant for the institution, they are not the existential all-or-nothing strategic move that a merger is. A joint venture may also represent a first step to more substantial collaboration, perhaps even a merger down the track.

Move early before the music stops – and financial distress starts

There's widespread agreement that mergers and joints ventures should maximise strategic opportunity rather than constitute a reaction to financial distress. However, too often natural caution leads to a failure to realise these strategic opportunities; meanwhile, financial drift can lead to disappointment, then to distress and then to panic into a ‘fire-sale merger’, where no-one wins. In these contexts, there may be a substantial first-mover advantage.

Given the increasing pressure in higher education to boost performance, a merger or a joint venture will achieve a stronger competitive position. This in turn will put more strategic and financial pressure on those who, through caution or inaction, continue in their current suboptimal form.

Leadership can make or break an opportunity

Successful partnerships require university leaders who effectively make the case for collaboration. This involves focusing on the strategic drivers and benefits of an opportunity rather than just on the financial savings it might deliver.

A leader keen to seize an opportunity will need to work closely with university stakeholders. Emotional ties to institutions can be strong and have the potential to cloud the ability for various stakeholders to see the full range of opportunities that could arise from collaborations. This can lead to an attachment to the entity as it currently exists rather than a focus on the ultimate objectives of the university.

Executives will need to work closely with university councils. Often councils, quite rightly, see themselves as stewards of their institution who are responsible for preserving and conserving it to pass down to their successors. However, this should not prevent productive conversations about these opportunities. Executives will be well-served by making a case that emphasises both the strategic outcomes and the stakeholder benefits of a merger or joint venture. Given the turnover of leadership teams, a broad-based commitment is needed for a sustained push.

Now is the time for UK universities to think about the opportunities – as well as the risks and challenges – that could arise from collaborations, in all their potential forms. Universities that seize these opportunities will be the ones best placed to cope with external changes, and to position themselves for a more positive future.

Get in touch to discuss how Nous Group can assist your university’s strategic plans.