More university mergers on the cards, predicts Moody’s

Credit agency says the pace of change will quicken as governments seek cost savings

February 24, 2016
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Many more universities are set to merge or restructure in an effort to save money, a credit rating agency has predicted.

In its latest analysis of higher education globally, Moody’s states that both governments and universities themselves will seek further mergers to achieve economies of scale and improve efficiency.

“Merged entities can benefit from increased enrolment, size and programmatic diversity, but they simultaneously face risks as they address the structural challenges that contributed to the merger,” according to the Moody’s report, titled Global Higher Education Faces Period of Significant Transition, which was published on 24 February.

“As students become more mobile and less place-bound, governments look for efficiencies and cost pressures mount, the pace of mergers and restructuring of higher education will increase globally,” it adds.

Institutional mergers have become increasingly common over the past 15 years, the report says.

There were 92 mergers in Europe between 2000 and 2015, of which 64 took place between 2008 and 2015, the report says.

That compared with just 28 in the 15 years prior to 2000, it says.

In the US, the University System of Georgia has sought to consolidate its multiple campuses, while Alabama’s community college system has consolidated seven of its 26 colleges to reduce overheads.

“Public and governmental scrutiny of higher education outcomes and sustained drive for operational efficiencies will result in increased mergers, restructurings, and shared service agreements,” Moody’s says.

Universities will also rely more heavily on the bond markets and other forms of private finance to invest in academic and student facilities vital to attracting students amid increased competition.

It cites the recent multimillion-pound bonds secured by the universities of Cardiff and Leeds as examples of how institutions will “increase the use of debt markets as a capital funding source”.

Universities will also need to “explore alternative means of market access, such as through public-private partnerships, to fund the additional housing required for more demanding domestic and international students”, it adds.

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