Director: Daniel C. Levy

Growing Takeovers of U.S. Nonprofit Colleges

PROPHE Summary (by Prachayani Praphamontripong):

Private investors and academics foresee that many American nonprofit colleges would be takeover targets of commercial companies in the coming years. Their attractive features include their well-established names, regional accreditation, and strong identities. On the other hand, some nonprofit colleges already act like for-profit ones. Nonetheless, some downsides that can make investors wary include relative inflexibility in institutional decision making (as opposed to in businesses or for-profit colleges), overinvestment in real estate, and regulatory scrutiny. A profit motive may also lead to the institution reshaping its mission, resulting in opposition from faculty.

For the full story, see Inside Higher Ed News, December 14, 2005, "Nonprofit Colleges as Takeover Targets," by Doug Lederman.

PROPHE Observation (by Daniel C. Levy):

For-profit activity in US higher education increases in a variety of powerful ways. One is business companies buying up non-profit private colleges. This is also a potent international tendency, as when Laureate purchases institutions in Chile, Mexico, Spain and elsewhere. A related but separate action has been the buying of for-profit colleges; perception that the attractive ones have already been picked off fuels the growing attention to nonprofit colleges. As with the Andres Bello University in Chile, targeted nonprofits may be institutions with legitimacy and status. Whether more problematic demand-absorbing institutions would be targeted is another story.

But even the institutions of standing face cynicism from faculty, families, and official agencies about how much profit goals may undermine educational goals. In the US, academically prestigious universities and colleges are not targets but more and more nonprofit colleges face major financial challenges and, the more they respond by becoming more market-oriented the more their legitimacy may already be a risk and the idea of a for-profit takeover may become less shocking.