New on the for-profit higher education front

Apollo Global announced on April 29 that they are in discussions with BPP Professional Education, with an eye toward a possible purchase (for background, see my earlier report on Apollo's international activities). BPP Professional Education teaches a variety of professional development courses in areas such as accounting, finance, law, etc. The web site describes teaching centers in 11 countries (plus the UK), and many programs are also taught using distance learning. More notably, however, BPP contains the BPP College of Professional Studies, which in September 2007, became the first publicly owned private company in the UK to be awarded degree granting  powers.  The College is composed of a business school, and a law school. Should the discussions lead to a purchase, the price is estimated to be around $460M US.

On the home front, many smaller non-profit colleges have been struggling for years with declining enrollment, and increasing debt.  The current economic downturn is providing the "last straw" for some of them, and they are finding that the only practical solution is to be absorbed by a well-funded for-profit higher education corporation. In the past few weeks, Daniel Webster College, the College of Santa Fe, and Waldorf College have all taken steps in that direction.

On the 24th of April, Daniel Webster College announced that it had sold itself to ITT Educational Services.   Daniel Webster is located in Nashua, NH, and has about 1000 students, 750 of them residential. According to an article in the Nashua Telegraph, Daniel Webster had been considering a sale for several years because of financial difficulties.  According to this article:

Daniel Webster College President Robert "Skip" Myers said ITT has plans to eventually expand Daniel Webster into a regional and then national brand of schools.......
Daniel Webster College will remain autonomous from any of ITT's technology-oriented programs, with the faculty continuing to run academics and complete separation, Myers said. The name will remain except for a minor alteration: After the sale, it will be eventually known as Daniel Webster University. Distinction as a university will allow Daniel Webster College to not only increase students and faculty on the Nashua campus, but it would fit with the school's and ITT's goal to offer a "learning network" that will stretch across New England and eventually the country, Myers said.

This would be an interesting new strategy for ITT should it come about.

The College of Santa Fe has also been running a large deficit for considerable time. The College has only about 800 full-time students, and discussions with other non-profits regarding mergers,etc. had not worked out. Over a year ago, the College of Santa Fe entered into discussions with Laureate Education about a sale (see my earlier report on Laureate's move into the US).   Laureate was interested, but negotiations with creditors over existing debt apparently did not go well, so Laureate seemingly dropped out of contention. In December, it appeared that New Mexico Highlands University might take over the College, although there seemed to be no idea of where the necessary resources might come from.  The newspaper article describing the Highlands bid also stated that the faculty of the College had "surrendered" tenure "in order to court the for-profit education corporation, Laureate."  However, on May 1, Laureate rose like the Phoenix, and New Mexico Governor Bill Richardson announced a partnership between the State of New Mexico, the City of Santa Fe, and Laureate to "Save College of Santa Fe": 

The partnership envisions the City of Santa Fe, with support from the Governor’s Office, purchasing the college and then Laureate operating the college under a lease.

The Governor has pledged $11M to the deal. Even better of Laureate, the Governor has pledged his support in negotiating with creditors to bring the existing debt down to manageable levels.  So there is a reasonable chance that the College of Santa Fe will soon join the Laureate International Network.

Waldorf College, is a small (670 students) liberal arts institution in Forest City ,Iowa, affiliated with the Evangelical Lutheran Church. Waldorf has also encountered serious financial problems for some time, including a shrinking student body and large debt. The College has been seriously investigating options for over two years, but the downturn in the markets made it clear that it was time to move.  On May 8, Waldorf officials announced that the College would be purchased by the for-profit Columbia Southern University.  Columbia Southern bills itself as the "Premier Online University for Distance Learning."  Waldorf leaders said in their announcement that the College would remain a residential college, so this may reflect a move in a new direction by Columbia Southern.  In any case, with help from their new owners, Waldorf soon will be introducing new majors and degrees. As in the College of Santa Fe case, faculty will have to give up tenure. Scott Jaschik has a very nice discussion of this purchase in Inside Higher Education, including some thoughtful comments from a faculty member at Waldorf.

All of these purchases in the US have the characteristic that the purchased entity has the highest form of accreditation -  regional accreditation.  Although the accreditation does not move automatically when ownership changes, it is likely in these cases that it will.  Thus, three different for-profit higher ed organizations have profited from the current economic downturn to add regionally accredited institutions to their networks.

Comments

[Misha]

Whereas for-profits in the U.S. have found in the economic downturn an opportunity to marry up, in many other countries, they are the well-heeled spouse. There is considerable demand for higher education in the developing world. In these countries--namely African and South American--the playing field is wide open and dominated only by a handful of well-regarded public institutions. Demand is sky-high, and non-profits--often on account of their foreignness--benefit from a perception abroad that they are fairly reputable and of some, perhaps superior, quality.

[Charles Jannuzi]

It seems demographically speaking the higher ed sector in many countries is just over-built. As for publicly listed privately owned for-profit companies being well-funded, are they really? Or is this just another investment bubble?

Lloyd responds: Thanks for the comment, Charles. Countries vary enormously in the size of their higher ed capacity vs demand. Japan e.g. is overbuilt, China under built. There are sectors of the US that seem to be have excess capacity given the evolution of demand - the very small rural college may be one. However, there is considerable demand in the US which is not being well met by traditional higher ed, e.g. non-traditional students of all types. So we are over-built for one demographic, under built for another.
I don't know the answers to the funding questions - the downturn has certainly changed the landscape everywhere. However, enrollment has jumped significantly for most of the for-profits, so that it probably still an attractive field for venture money.