M&A bankers should consider going back to college

Strategic Education

08/05/2020 13:56

(The author is a Reuters Breakingviews columnist.  The opinions
expressed are her own.)
    By Lauren Silva Laughlin
    DALLAS, May 8 (Reuters Breakingviews) - Wall Street bankers
fretting about the deal lull may want to head back to college.
Not for the keg parties, but to advise their alma maters on
strategic options. Universities, especially in the United
States, will need to close, go digital or merge to survive. 
    Even before Covid-19 shut down campuses, higher education
was troubled. Pressure to grow enrollment forced schools from
Australia to Britain to California to seek students abroad. The
pandemic-inspired switch to online learning has exposed the
folly of soaring tuition. Public and private funding are being
crunched by the Great Lockdown’s economic fallout.  
    International students will now stay home. Strapped parents
will question the value of leveraging up for the “college
experience,” which costs some $100,000 over four years in the
United States, the National Center for Education Statistics
says. The virus will double the number of colleges failing over
the next decade, compared to the previous one, to 700, predicts
AGB senior fellow Rick Beyer.
    Some, like Boston University, which charges more than
$74,000 annually, are cutting costs. Others will justify
expenses by offering online courses for specialty degrees, like
a diploma in finance. That’s sensible if a lecture hall for 250
students can accommodate another 5,000 via Zoom. Paying more for
the live experience may bring perks like office hours. While
universities can build this, any good consigliere would suggest
buying established businesses and reaching for “revenue
synergies.” 
    Oxbridge and the Ivies won’t want to dilute pedigrees or
miss offering a bachelor’s in Shakespeare for $250,000 to the
well-heeled. Partnerships will emerge for the next tier.
Faith-based universities, for instance the big four in Texas,
could roll up front offices. Rather than four finance vice
presidents, “the Colleges of the Christians” could have one. 
    Merger advice will be welcomed by trustees. A 2012 deal
between Georgia Health Sciences University and Augusta State
University offers a blueprint. That union helped Georgia Health
bring Augusta’s margins in line with its own, like any
successful deal, according to educational advisor TIAA
Institute. 
    Shacking up with for-profit outfits like Strategic Education
 STRA.O , whose shares have surged 30% since late March, might
work for some. But more universities will need to simply embrace
the business school playbook – with some help from finance
alums. If that doesn’t work, they’ll call in the grads who went
to McKinsey’s restructuring practice.
    On Twitter https://twitter.com/thereallsl 
    
    CONTEXT NEWS
    - The University of Michigan expects to lose up to $1
billion through the end of 2020, the university’s President Mark
Schlissel said in an email to staff on April 20, according to
NPR station Michigan Radio. MacMurray College, a 174-year
institution in Jacksonville, Illinois, will close in May.
    - For previous columns by the author, Reuters customers can
click on  SILVA/ 
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 (Editing by Rob Cox and Leigh Anderson)
 ((Lauren.SilvaLaughlin@thomsonreuters.com))