Leadership Foundation

Merger Evaluation Reports

• Ofsted summary review of further education provision in higher education 2003–09
• The evidence base on college size and mergers in the Further Education sector
• Evaluation of mergers in the FE sector 1996-2000
• An evaluation of the merger that created Volunteering England

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Ofsted summary review of further education provision in higher education 2003–09

By Ofsted (October 2009)

Key findings relating to mergers between HE and FE institutions

• The mergers of higher education institutions with satisfactory or failing FE colleges that had a broad academic and vocational curriculum have not led to significant improvement in the quality of the FE programmes.
• Higher education institutions with successful FE provision had a curriculum offer that was closely aligned to the institution’s expertise, experience and HE programmes.
• FE students were well served by higher education institutions that specialised in the creative arts.
• Accountability and line management arrangements for FE within higher education institutions were clear where the FE was successful.
• Rigorous quality assurance and good teaching and learning were key to raising standards and to maintaining high quality FE provision.

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The Evidence Base on College Size and Mergers in the Further Education Sector

By Laura Payne. Department for Innovation, Universities and Skills (2008)

This report presents a discussion of corporate merger theory, how mergers affect markets and competition, their benefits for consumers and companies and the relevance of these discussions to the FE sector in the UK.

Key findings:

• There is very little evidence on the impact of college mergers, and the available evidence is not conclusive. Research has identified potential benefits to college mergers, but also identifies risks.
• There is no evidence of a relationship between college size and success rates
  -  There is a modest correlation between size and inspection rates but smaller colleges can achieve equally high average inspection grade scores as larger colleges, and not all large colleges perform well;
  -  There is no relationship between college size and financial health (although it is recognised that the financial health of a college has been a factor in some proposals); and
  -  Importantly, there is no evidence to suggest that merged institutions perform any better or worse than those which have not been involved in a merger.
• It appears that success of mergers is not guaranteed, but may be dependent on a complex set of local factors and conditions with no consistent message about when mergers are most likely to succeed.
• Some of the identified benefits of merger include: efficiencies through curriculum integration; reduction of over-provision; improved access to capital funds and betterment of estates.
• The research shows that the policy environment is a key driver of merger activity. Other identified drivers include key personnel with strategic vision, financial difficulties, enhancing core business, defence against competition, and strategic strengthening of position.
• Evidence from other sectors (higher education and business sectors) suggests:
  -  substantial cost savings from mergers in any sector are difficult to achieve;
  -  communications and college culture are important;
  -  mergers should be part of a business strategy with clear objectives;
  -  the impact of mergers should be evaluated rigorously.

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Evaluation of mergers in the FE sector 1996-2000

Centre for Education and Industry, University of Warwick

Full report also available

Key findings:

• Mixed type mergers were more problematic (Ie FE college with 6th form college).
• Smaller mergers were not necessarily efficient, mergers of larger institutions seemed to result in better outcomes.
• Potential problems associated with merger were frequently underestimated in the planning stage, particularly the length of time needed for planning.
• Financial benefits were only seen in the very long term, if at all (mergers were found to be very costly).
• Culture clash was a significant and often underestimated issue in the mergers.
• Recognising and supporting middle management in the merger implementation phase was found to be important.

Pre-conditions which were more likely to lead to a successful merger:

• A realistic risk assessment and business plan are in place well in advance of the merger.
• There is board commitment to the merger and strong SMT capable of planning the process.
• Preparatory training is made available to all those with a responsibility for carrying forward the merger plans.
• There is an experienced financial manager involved.
• Enhanced operational support systems are in place and the associated additional costs recognised and planned.
• A clear post-merger strategy is in place.

Pre-conditions more likely to lead to an unsuccessful merger:

• The main intention was to save money or achieve economies of scale.
• A merger is seen as an ‘empire building’ exercise.
• Mergers are simply a response to funding body or other pressures.
• A more federal approach is proposed – central management with direct control appears to be essential.

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An evaluation of the merger that created Volunteering England

Charity Commission (May 2007)

Merger and collaborative working among charities continue to be popular areas for debate within the sector. There have been some notable examples of merger between charities of all sizes, and learning continues on both the positive and negative aspects of merger.

Factors critical to the success of the merger - likely to be essential to the success of any merger:

• Existing partnership or working relationships
• Compatibility of purposes and a shared vision between merger partners
• Planning and review of the merger process
• Effective internal and external communications
• Use of skills, expertise and professional advice where needed
• Ability to deal with concerns and manage expectations
• Managing growth
• The roles played by key individuals, particularly the trustees and chief executives of the charities
• Application of the Thinking Environment methodology, particularly in meetings

Obstacles and challenges overcome in the implementation of the merger - again it is likely that similar obstacles and challenges may arise in the course of any merger:

• Evolving and adapting processes to meet new situations
• Overcoming breakdowns in communication
• Securing buy-in from stakeholders
• Reassuring staff

Further lessons can be learned from this merger, which may be of benefit to other charities considering merger:

• The legal and technical issues of merger should not be underestimated, and need to be anticipated
• Conflicting stakeholder needs and expectations can be challenging to manage, particularly where there are different (for example regional and local) perspectives
• ‘Merger’ is not completed with the establishment of the new organisation and the winding up of the old. Many new issues will arise in terms of staff management, ‘teething problems’ and organisational growth

Guidance from the Charity Commission for all charities who may be considering working in partnership or merging with other organisations can be found at Collaborative Working and Mergers.

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For more information about the Knowledge Resouces contact:

Eleni Stamou, Research Manager