Helen Goreham, Research Manager, Leadership Foundation for Higher Education
Mergers occur when two or more organisations (or institutions) combine - either to create one new organisation, or retaining the identity of one of the original organisations. Mergers continue to be relatively common in the corporate sector. In higher/further education (H/FE) in the UK there have been two key periods of intense merger activity in recent years - the late 1980s to early 1990s and then the late 1990s to early 2000s. The latest indication is that many in the UK expect a new phase of mergers to take place either following the recession or in response to other political pressures.
Most of the available UK H/FE literature on mergers arises from the two phases noted above. Australia and South Africa have also experienced significant 'waves' of mergers and there is relevant literature from these countries that examines the challenges and benefits. In the business and management fields, Professor Huw Morris (Pro-Vice-Chancellor (Academic) and Dean of the College of Arts and Social Science, University of Salford; Recent Chair of the Association of Business Schools) notes that "the early work on mergers and acquisitions was essentially functionalist and normative in focus and flavour. This has been replaced in recent times by analyses which focus on many more detailed quantitative analyses in the field of finance, and discourse based analyses in strategy and organisational studies which focus on the way people write and talk about mergers and comment on their success. This shift in focus means that in fact, some of the earlier studies and books may be more accessible to practising managers today than some of the more recent studies."
In terms of the benefits of mergers in higher education and when they are most likely to be successful, despite a wealth of evidence from higher education and beyond, there does not seem to be a definitive answer. There are certainly some factors which make some mergers more likely to be successful than others (the references below discuss these in more detail) and there are examples of successful mergers. However, the main lessons to come out of the literature seem to be that mergers are extremely expensive in terms of money and resources (and as such undertaking a merger for financial reasons alone is very high-risk); that there are unlikely to be any significant benefits in the short-term (except non-closure of an institution), that long term benefits take many more years than expected to develop, that there can never be too much planning in preparation for a merger and finally, that the organisational, human and cultural elements of the 'new' institution need to be made a priority, particularly after the merger has occurred.
The resources below represent a selection of some of the material available from journals, government sources and institutions - in most cases summaries of abstracts are presented along with a link of how to access the full report. They are by no means exhaustive but will hopefully offer some useful insights.
Click on the headings/subheadings to proceed directly to a specific section. Or scroll down to view the full resource:
Report to HEFCE by Oakleigh Consulting Limited (published November 2010)
Key findings include:
Critical success factors, good practice & lessons learnt from institutional mergers
Lessons learnt from less formal partnership and collaboration in HE and FE:
“Most mergers fail to live up to expectations because of poorly managed post-deal integration. In brief, this is because of: lack of appropriate planning; poor strategy and management; lack of open communication and a clear vision; and a range of people and cultural issues."
Financial considerations
Higher Education Policy 21, 99-121 doi:10.1057/palgrave.hep.8300172. By Grant Harman and Kay Harman. (March 2008)
Recently, in a number of countries, there has been a decided shift from mergers initiated by governments, and dealing mainly with ‘problem’ cases, towards institutional-initiated mergers involving strong institutions, and with clear strategic objectives. These issues are addressed and a case study is presented of the 2004 merger that created the new University of Manchester.
By Martin Hall, Ashley Symes and Thierry Leucher (August 2004)
The paper presents a set of observations that are seen as important for informing a full consideration of the governance of merger.
Presented to the Reform of Higher Education in Six Countries International Workshop, Centre for Policy Studies in Higher Education and Training, University of British Columbia, Vancouver, British Columbia. By Daniel W. Lang, University of Toronto. (August 14-15, 2003)
Examines mergers from Australia, Canada, the United Kingdom, South Africa, the United States, and Japan – focusing on jurisdictional differences and presenting five key characteristics of merger:
The paper concludes that while at this time it found more successes than failure among HE merger, it “it is not a record that can commend merger universally”. It also posits an important distinction between mergers which are similar to those in the corporate world, ie between “two highly autonomous institutions voluntarily choosing to merge, usually for reasons of economy” and mergers which are “initiatives more of broad public higher educational policy than of corporate strategy”.
By Kay Harman and V. Lynn Meek. Higher Education 44: 1–4. DOI: 10.1023/A:1015598525413 (2002)
A variety of different models and mechanisms have been used by higher education systems in many countries to achieve restructuring and increase levels of institutional collaboration. Drivers of these efforts have been many and varied but particularly important have been pressures to:
Increase efficiency and effectiveness, especially in coping with rapid and substantial growth in student numbers which in turn brings heavier demands on institutions;
In many cases, restructuring efforts have formed integral parts of major expansion and adjustment as relatively small and elite systems of higher education have moved to mass higher education. In this context, the dominant trend has been to move from relatively small and often highly specialised institutions towards fewer, larger and more comprehensive institutions, and from single site and single campus to multi-site and multi-campus institutions.
The articles which comprise the rest of the special issue highlight that mergers can take any number of different forms, from loose affiliations at one end of the spectrum to tightly integrated models at the other. In turn, the particular form of a merger is likely to have a major influence on the merger process, the kinds of difficulties likely to be experienced in bringing different types of institutions together, the kind of structures likely to emerge and the degree of success of efforts to integrate the partner institutions. The most common forms of merger can be portrayed as voluntary and involuntary, consolidations and take-overs, single sector and cross-sectoral, twin partner and multipartner, similar academic profile (‘horizontal’) and different academic profile (‘vertical’) mergers.
South African Journal of Education, 21(4). By M.M. Botha (2001)
Basic terminology is described, for example:
Types of merger are presented (from Walter and Gitman)
Typical problem areas are discussed that could result in the failure of a merger if they are not carefully managed:
Three potential structures for post merger institutions are identified:
A series of checklists for those involved in mergers are also listed highlighting issues to consider at each stage.
Higher Education Quarterly, Volume 54, Issue 4, pages 343–366. By Grant Harman. (October 2000)
For the past forty years, institutional mergers have been a major and controversial theme in Australian higher education. Three main phases of major mergers are reviewed with particular attention being paid to reasons for merger, success factors, and longer term results. While merger experiences have often been traumatic for participants and participating institutions, on balance the longer term results have been positive, producing a university system today comprising relatively large and comprehensive institutions, well suited to compete in the new internationally competitive environment.
Higher Education Quarterly, Volume 51, Issue 3, pages 251–263. By Gillian Rowley. (July 1997)
This paper looks at recent mergers in higher education from a strategic management perspective. It is based on private research undertaken for a dissertation in completion of an MBA degree in 1996. The objectives of the study included the discovery and analysis of merger input factors and process variables, and an assessment of the contribution of both towards an effective outcome. The paper considers similarities and differences between mergers in higher education and as a whole. The process included structured interviews with senior management in two universities, which helped to develop a census survey of incidents involving an HE partner between 1987 and 1994. The incidents included mergers with further education colleges, other HE institutions, and colleges of health.
By Ofsted (October 2009)
Key findings relating to mergers between HE and FE institutions
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
Centre for Education and Industry, University of Warwick
Full report also available
Key findings
Pre-conditions which were more likely to lead to a successful merger:
Pre-conditions more likely to lead to an unsuccessful merger:
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:
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:
Further lessons can be learned from this merger, which may be of benefit to other charities considering merger:
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.
Professor Malegapuru W Makgoba (2008)
Yinmei Wan and Marvin W. Peterson, The University of Michigan. International Journal of Educational Development Volume 27, Issue 6, Pages 683-696 (November 2007)
Rhonda Hawkins, Nigel Bond & Geoff Scott (October 2005)
Engela van Staden (April 2005)
This publication forms part of the advice and information published by the Office of Fair Trading and the Competition Commission under sections 106(1) and (3) respectively of the Enterprise Act 2002.
Content includes:
THE 21 January 2010
If the Government wants to encourage mergers to ameliorate the university funding crisis, it must address a number of issues … All other things being equal, no governing body is going to vote to merge with an institution that will drag down its RAE or league table score….So often in life, that which it is intellectually self-evident we should do may, when cross-multiplied with human considerations, turn out not to be an attractive option. Why else do we have more than one high-street supermarket, high-street bank or high-street clothing retailer?
TES March 2010
The principal of a college credited with the fastest turnaround from failure to success has warned that mergers could send further education institutions into decline.
“My experience is, in the process of merger, people sometimes underestimate how difficult it can be to manage the impact it can have,” he said. “People take their eye off the ball on things like success rates. It becomes all about who gets the new job and all the focus is internal.”
Gerald Adolph, Karla Elrod, and J. Neely. Harvard Business School, Working Knowledge for Business Leaders. (2006)
There are some transactions, such as the marriage of HP and Compaq, that are troubled from the start. There's little anyone can do. Fortunately, this is far from the norm. More than two-thirds of transactions that fail do so at the execution stage. DaimlerChrysler, for example, neglected early on to establish a proper set of guiding principles based on the merger's strategic intent, and then continued to misfire by failing to align leadership and integrate the cultures of the two organizations. Is there a lesson in this? Absolutely. Execution-related failures can be avoided. To do so, you need to establish a program integration team early in the process that can respond to the execution risks inherent in all transactions. We call these risks the "nine deadly sins." Understanding them is a critical first step toward a successful merger.
Mariëlle G. Heijltjes, Hanneke S. ter Velde Maastricht University, the Netherlands. (2005)
Drawing on the merger and CEO succession literature as well as on findings from research on organizational change, this study examines what leadership issues drive success in a postmerger context. Data from 45 recently merged units within a cooperative bank in Europe indicate that the people skills of the newly appointed top manager matter most. Specifically, his/her integration ability followed by the ability to positively influence the internal working environment are significantly correlated with post-merger success. Politics in terms of whether the top manager had a track record inside or outside the organization did not appear to be important.
Paper produced for the Centre for Creative Leadership by by Günter K. Stahl. Adapted from an article first published in the INSEAD Quarterly, July 2004, no. 8
The literature on mergers and acquisitions indicates that failure rates typically range from 50 to 70 percent or even higher. A Business Week study of megamergers conducted between 1998 and 2000 found that in more than 60 percent of the cases, shareholder value was destroyed. Why do so many corporate combinations that looked like such great opportunities end up in disaster? Recent research suggests that contrary to common belief, it is not poor strategic fit that most often causes mergers and acquisitions to fail but poor execution. The errors can be seen, for example, in instances of insensitive management, lack of trust building and communication, slow execution, power struggles, or a lead-ership vacuum following the deal.
Research on alliances shows by and large a similar pattern. Even with this kind of information, most corporate combinations still place special emphasis on the strategic and financial goals of the transaction, whereas the cultural and people implications rarely receive as much attention. To gain some insight into what sets winning corporate combinations apart from the rest and the leadership challenges involved in integrating organizations, this report is based on interviews with Carlos Ghosn, the president and CEO of Nissan, who in April 2005 is to become president and CEO of Renault (which owns 44 percent of Nissan), and Jean-Pierre Garnier, executive director and CEO of GlaxoSmithKline (GSK).
Angela Hyde; James Paterson Journal of Change Management, Volume 2, Issue 3, pages 266 - 271 (September 2001)
Astra and Zeneca merged in 1999 to form AstraZeneca, one of the top five pharmaceutical companies in the world. This paper looks at the role that new leadership development programmes played in supporting cultural integration. Three new global, cross-functional leadership development programmes are described, outlining how the objectives, design and style of the programmes supported the merger effort. Outcomes from the programmes are discussed as well as the broader lessons that have been learned; the key ones being the importance of managing change proactively, the need to have clear objectives that are aligned with the company's strategic objectives and that also meet the needs of the participants and, crucially, maintaining senior management support.
Nils Bohlin, Eliot Daley, and Sue Thomson
The question is, why do mergers and acquisitions work for some and not for others? The answers are of course complex. Mergers and acquisitions vary widely along a number of dimensions: company size and diversity; industry characteristics; overlap of products, markets, and customers; prior mergers and acquisitions experience of the parties; whether the takeover was hostile or friendly; relative performance strength of the acquired firm; and how much assimilation is desired or required.
Despite this variety and complexity, we suggest that those that fail share one critical blind spot: they treat “synergy creation and exploitation” as a euphemism for cost-cutting. By focusing too exclusively on costs, they minimize – or defer until too late – the human and cultural dimensions of blending two entities into one seamless, growth-oriented business. After all, organizations are basically collections of people sharing a common purpose, one or more locations, and other resources such as money, equipment, and common processes. Still, many business managers persist in believing that the latter assets are the ‘real’ organization, while the people are only the ‘soft side’ of the equation. But how ‘soft’ are the people issues if they can bring an otherwise ‘perfect’ merger-integration effort to its knees – as evidenced in recent press coverage of major transatlantic mergers in the pharmaceutical industry. A recent Forbes 500 study asked CEOs why merger synergies are not achieved: first in their list of ‘failure factors’ was ‘incompatible cultures’ and three of the top six factors were culture-related.
In this article we examine the human and cultural aspect of the merger experience and suggest a process and key principles with which companies involved in mergers or acquisitions can greatly increase the odds of creating an organization capable of synergistic growth.
The article also suggests the process of bringing two companies together follows six generic phases that can be grouped into three stages: pre-merger planning, merger, and post-merger integration.
Timothy J. Galpin & Mark Herndon. Jossey-Bass Business & Management Series, 2007
Price Pritchett, Pritchett Publishing Company, 2007
David Fubini, Colin Price and Maurizio Zollo. INSEAD Business Press.2006
Edited by G. K. Stahl & M. Mendenhall, Stanford University Press, 2004
A synopsis of The Neglected Importance of Leadership in Mergers and Acquisitions. Sim B. Sitkin and Amy L. Pablo from the above Stahl & Mendenhall publication by Michael Shambon, Claremont McKenna College is available to download. 2009.
Richard Luecke, Harvard Business School Press, 2003
Published January 2011
Helen Goreham, Research Manager