Hi, I'm a college student in Philadelphia, I saw that a large school in the area, Drexel University has been acquiring other Universities in the area with the latest being Salus University in Elkins Park. The Uni said more Acquisitions are on the horizon. I'm sure with declining enrollments across the Us its not just a Philadelphia-specific trend. I can't ever find advisors behind these transactions or too much detail, so I figured someone here may have some insight. What do these transactions look like and in what ways are they different from company acquisitions? And what bank/coverage groups cover these kinds of transactions?
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Universities doing M&A with other universities is part of what Public Finance groups do. Non-profit universities (which excludes for-profit institutions) can issue tax-exempt debt, and generally have no equity component in their capital structure like a corporation does. This makes them similar to U.S. state and local governments, which are covered by Public Finance groups, so most investment banks that are active in Public Finance also have a sub-group that focuses on Higher Education. It is a very niche sector, but the client base is all of the non-profit universities in the U.S., whether it be private institutions like Drexel or UPenn, or public like Penn State or the University of Texas. They all issue debt and need access to fixed-income capital markets like corporations do, so Public Finance investment bankers cover their needs. They also do M&A between universities in the rare situations that require it.
Not all investment banks have a Public Finance group. It's generally just the bulge bracket firms and middle market banks that have lots of capital. Firms like Morgan Stanley, RBC, Piper, J.P. Morgan, etc.
Higher Ed M&A has increased recently and is expected to continue ahead of the expected enrollment cliff in ~2025. You mentioned Drexel, but I am also aware of Villanova in the Phili area taking part in this trend. Depending on the deal type I've heard Higher Education Public Finance Bankers from BBs work on this stuff, with smaller/niche banks also pitching in.
The biggest deal in this space is between the University of Phoenix and the University of Idaho. I believe Tyton Partners and Citi have been involved with the deal. There has been plenty of news coverage on this deal, so it should be fairly easy to read about.
There is also a good article on Higher Education M&A from McKinsey here: https://www.mckinsey.com/industries/education/our-insights/higher-ed-is…
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