Managing a merger

April 19, 2002

Collaboration is the latest catch-phrase in HE, writes Will Light, but it's trickier to do than it sounds

The Higher Education Funding Council is preparing to review its funding mechanisms, with "regional collaboration" high on the agenda. At the same time, minister for higher education Margaret Hodge is warning that some universities may be surplus to requirements. A shake-up looks on the cards, but what is the best route ahead?

Mergers between two institutions seem to be all the rage, so long as there is some perceived advantage. The usual requirements are that the two institutions are not too diverse in mission, are reasonably close geographically and have complementarity of provision. A key question is recruitment. Will the new merged university generate an institution that is at least equivalent in size to the sum of the two old ones, even if departments are merged?

The current thinking is that the merger can be achieved and made to work if a reasonable number of the preconditions are met and if senior management can convince the troops.

But most geographical coincidences occur between institutions that have very different characters: Warwick and Coventry; Liverpool and John Moores; Bristol and the University of the West of England. There is not a chance that a mutually agreed single institutional merger will work in these situations. Branding must be preserved. And yet the economies of scale made possible by geography are significant. A unified administration, unified estates management, unified purchasing, unified student services, unified information technology provision and so on.

It is possible to merge such institutions, but you have to have the correct structures open to you. Companies do this all the time. Look at Go for example, the no-frills travel business set up by British Airways. OK, it was not a merger, but it serves my purposes. BA's biggest problem was branding. It wanted to go upmarket and did not feel that the low-cost option would sit well alongside its other business. It probably also thought that Go would benefit from separate management.

This kind of model should be a very attractive route for Hefce, and one that it could be pursuing with great vigour, but there are hurdles. We do not really have the structures in place to make it possible for the two parts of a unified university conglomerate to act separately when necessary. To make this work in the university sector, we would need, at the very least, to be able to have all the various audit procedures take place separately for each piece of the conglomerate. That should not be too hard. At a stroke of the pen, our dynamic new Hefce leader should be able to make it possible for research assessment and Quality Assurance Agency exercises to be conducted for the constituent parts.

Indeed, an even more revolutionary incentive to such alliances could be offered - the possibility to be audited jointly or separately could be the conglomerate's choice. Of course, this is pretty scary. One could see a strategic alliance between a hugely traditional redbrick and a new university where the agenda was to remain completely distinct except for the widening-participation survey.

More of a hurdle is the effect of university league tables. If newspapers assessed two parts of a conglomerate together, the damage could be enormous. So what looks like a sensible course of action might be negatively controlled by an artificial external constraint.

Finally, there is asset-stripping, whereby institution Y might offer the potential to be asset-stripped by institution X. The eventual combined unit would consist of a large percentage of institution X, a very small remnant from institution Y, and a large bundle of cash in vice-chancellor X's hand - probably generated by sales of capital assets.

This scenario, which amounts to a hostile takeover, would be impossible in today's climate. First, that is not how things are done in academia. Second, what would Hefce and the government say? And third, institutions are not companies listed on the Stock Exchange. But then, I never thought a football club was suitable to become a listed company until Manchester United sparked a stream of flotations.

Will Light, a pro vice-chancellor of the University of Leicester, is writing in a personal capacity.

Are mergers just an excuse to asset strip the weaker partner?
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