HEFCE has recently issued a circular letter (22/2012) setting out the outcomes from recent consultations on collaborations, alliances and mergers in higher education.

Their report setting out lessons learned and giving guidance was also published this month http://www.hefce.ac.uk/pubs/year/2012/201221/

It recognises that there are a range of ways in which collaborations and mergers can be structured and the term “CAM” is used to refer to collaborations, alliances and mergers.

There is very little hard evidence of the extent of CAM activity in the HE sector and even less evidence about the levels of success or failure. However, it is recognised that CAM activity is likely to increase having regard to the rapidly changing nature of the sector and the challenges which universities face.

The report recognises that there is a fairly high percentage of failure in mergers in the private sector and similar failure rates for alliances and joint ventures. Although there are clearly differences between the private sector and HE, many of the lessons from the private sector are well worth noting.

In many ways, the report sets out a number of factors which, perhaps, ought to be fairly obvious. However, projects involving CAM often assume a life of their own and the basic rationale often gets forgotten.

The report recognises that there may well be worthwhile economies of scale deriving from a CAM project, but it points out that size in and of itself is rarely a good argument for a merger. It really is important to identify the perceived benefits of any CAM project and to ensure that those benefits are clear and associated risk factors are identified.

The prospective parties should ensure that they clearly evaluate the various options which might be available to them to achieve their objectives. It is all too easy to identify a particular structure and then pursue it without having considered the alternatives.

One of the factors which needs to be taken into account is the amount of time and effort that any CAM project will involve. It is likely that those involved at the participating institutions will have little direct experience of managing or being involved in such projects. That is also the case in the private sector. It is almost always the case that those involved grossly underestimate the time and effort which is required and the disruption that can be caused to normal day-to-day working. It is therefore vital that those responsible for management of the project are given the time and resource to devote to the project.

We think that it is vital that reasonably detailed heads of terms are prepared at a relatively early stage of the project. These should address all of the major issues so that time, effort and money is not wasted on pursuing a project which, at the end of the day, is never going to be acceptable to one of the parties. It is all too easy to “park” difficult issues and leave them to be resolved at a later date. That is a recipe for disaster. The difficult issues need to be identified early on and a solution needs to be agreed.

Too often, we see heads of terms which identify problem areas but which merely say “to be agreed”. That is really putting the issue on the “too difficult” pile. The fact is that the issue will not become easier with the passage of time.

Many of the difficult issues relate to governance. In most CAM projects there will inevitably be some degree of loss of control by one or more of the participating institutions. That is almost inevitable and needs to be accepted from an early stage.

From our own experiences, many CAM projects reach fairly advanced stages of discussion and negotiation without the parties fully understanding the range of options which are available to them. All too often, the parties decide on a legal structure and then try to shoehorn their proposals to fit that structure. It would be far more productive for the participating institutions to concentrate on their objectives and, once these are reasonably developed, take advice as to how these can be best achieved.

Clearly, some professional advice should be taken at an early stage to ensure that there are no insurmountable problems but detailed structures should be left to a later stage.

Matters which do need to be addressed at an early stage include tax and pensions. Issues with these might well inform decisions about prospective structures.

One of the difficulties in HE is to decide how success can be measured. In the private sector, success is almost invariably judged by financial benefit. In HE, financial issues should not be at the fore. The core purposes of universities are teaching, research and knowledge exchange, and a clear case based on advancing them should be at the heart of all CAM projects.

Very often, the original clear purpose can become clouded or complicated as the matter proceeds and more and more people become involved. It is very important that there is strong leadership to ensure that the project is kept on track. That is made easier if clear heads of terms have been agreed at an early stage and major issues have been identified and addressed.

At one end of the CAM spectrum there can be relatively informal collaborations which involve ongoing relationships between the parties. It is important that these are structured in a way which permits change but which also offer benefits to both of the parties. Any agreement which is unduly one-sided is unlikely to endure.

At the other end of the spectrum is an out-and-out merger. It is very rare for any merger to be a merger of equals. In most circumstances there will be a dominant partner and the governance structure of the “merged” institution is likely to be drawn substantially from the management team of the dominant institution. That is something which needs to be accepted from an early stage, however unpalatable it might be.

Indeed, many mergers fail to proceed because of the fact that “two into one” does not go. This inevitable, and understandable, problem actually inhibits improved and expanded provision of the core purposes of universities. It is very easy to say to the senior management team of the junior partner that they should proceed with the merger and lose their jobs because there will be an enhanced public benefit.

HEFCE has said that it will review its guidance in another three years’ time. We suspect that the world of higher education will be significantly different by then, and it will be interesting to see how that is influenced by increased CAM activities.