Welcome to a university challenge. Here’s your starter for ten.
Name the rationale for two separate US university M&A deals, one costing $1, and the other $550m.
The first, in 2017, is the deal that saw onsite research university Purdue University in the US buy mainly online Kaplan University for $1, plus a long-running services agreement.
The second—started in 2023 and likely to conclude in 2024—is a planned $550m tie-up between the University of Idaho and the University of Phoenix, which has local senators, higher education regulators, local media, and university alumni scratching their heads. The University of Phoenix, like Kaplan, is a primarily digital, for-profit institution.
University deals
The driver for the University of Idaho deal is instant access to an online capability that would take the University of Idaho between 10 and 15 years to build if it tried to create the asset itself. Of course, it takes two to tango, and the University of Phoenix is ready to dance, having been spurned in a similar type of deal in April by the University of Arkansas.
University of Idaho officials have said the affiliation with the University of Phoenix would give the state university access to a robust technological infrastructure and online academic programs not currently offered at the school.
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By GlobalDataThe University of Idaho also believes the deal will help it raise money. The planned non-profit will issue municipal bond debt to finance the purchase, which the University of Idaho anticipates will generate at least $10m in annual revenue.
Hurdles, not formalities, for Idaho
For the University of Phoenix, having recently been jilted, if not at the church but just down the road from it, a marriage offer from the University of Idaho was not one that could be turned down.
There are still some hurdles to jump, and it would be presumptive to call them formalities. The State of Idaho’s Attorney General Raúl Labrador has issued a lawsuit that accuses the State Board of Education of breaking state law when it met behind closed doors to discuss the Phoenix purchase. Another potential obstacle is that the bond market will still have to finance the University of Idaho’s purchase.
Plenty to ponder in Phoenix
Meanwhile, the University of Phoenix has plenty on its plate too. In September 2023, it emerged that more than 1,200 University of Phoenix students will have their student loans discharged after a complaint from the Federal Trade Commission that the institution had wrongly suggested it worked closely with high-profile companies to develop its courses.
According to US reports, the Federal Trade Commission investigated whether a national advertising campaign that promoted the university’s relationships and job opportunities with employers such as Microsoft, Twitter (now X), ADOBE, and Yahoo, was deceptive. Phoenix eventually reached a $190m settlement with the FTC to resolve the investigation. As part of the deal, the university did not admit to or deny any wrongdoing alleged in the federal complaint.
As well as the continuing debate over the University of Idaho–University of Phoenix deal, financial question marks are now beginning to surface about the Purdue University-Kaplan University deal, while the University of Arizona’s purchase of for-profit Ashford University is also facing some scrutiny. To return to our episode of University Challenge, here is a bonus question.
Given what we know from the examples quoted earlier involving Purdue University and the University of Arizona, how do you rate the University of Idaho’s chances of completing its planned University of Phoenix deal—and making it a success? Show all your workings!
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