Education: It makes sense to merge

Merger mania is sweeping the world. Mobile telephone companies, drug companies, accountancy firms, banks, motor and oil companies are thinking about mergers, even if they are not actually taking the plunge. Now higher and further education are testing the water and, in some cases, leaping in at the deep end. Around 50 further education colleges are discussing merger; last year there were nine mergers between further education colleges and between further and higher education, including a mega-merger of three further education colleges in Nottingham (a fourth will join them soon).

"I believe the Government wants mergers," says Professor David Warner, principal of Swansea Institute of Higher Education, who will be speaking on the subject at a conference next week. "If you look at the map of further and higher education in the United Kingdom, it's a bloody mess. There are 176 higher education institutions and nearly 500 further education institutions in what is an incredibly tiny country. The current state of further and higher education owes nothing to reason or planning, but all to history and politics. The reasons why they exist are very strange. Every institution has a perverse history. Only this country could have achieved what we have."

There are many reasons why universities and colleges want to tie the knot. Behind many mergers lies a financial imperative, or a desire to rationalise academic offerings. Moreover, there are some economies of scale to be had out of buying more sausage rolls or photocopying contracts, according to David Palfreyman, bursar and fellow of New College, Oxford, and one of the authors of a new book on mergers.

But research tends to suggest that mergers don't lead to savings unless one is talking about asset-stripping - selling off buildings that are no longer needed, as happened in London University in the 1980s, or making wholesale redundancies as in teaching training in the 1970s.

From his knowledge of mergers in the private sector, Richard Whittington, reader in strategy at the Said Business School in Oxford, and another fellow of New College, Oxford, believes mergers would save money through the sharing of resources, headquarters and top management costs. Furthermore, savings can come from economies of scope - the ability to market complementary services, courses or modules which fit well together. (That factor lay behind Nottingham's mega-merger.)

But Whittington also emphasises the beneficial psychological effect of mergers and acquisitions. In the private sector, one of the great hidden gains is the ability to break up traditional practices, he says. In education this might involve middle managers whom no one has had the courage to stimulate or push before. An indirect benefit would be a shake-up for the world of higher and further education. At the moment the UK system works a bit like Japan or the old Soviet Union, he believes, without a market for the control of assets. "Top managers become systematically complacent. They don't have to justify every day to the market that they are making the best possible use of their resources."

For all these reasons the drive to merge is relentless, the experts believe. "Within 10 years of the millennium up to one-half per cent of all institutions (almost 300) will be involved in some sort of significant change," says Whittington.

New phrases such as "strategic alliance" are creeping into the language of higher eduction. West Hill college of higher education in Birmingham is creating a strategic alliance with Birmingham University. The alliance is stronger than collaboration but falls short of merger. The university isn't seeking full-scale merger because it daren't risk its position in the research assessment exercise. At the same time, it wants to stop West Hill getting into bed with anyone else.

Although most of the mergers taking place now are between further education colleges, the most fertile area for mergers, Warner thinks, is between further and higher education. The problem is that the Government, in the shape of Baroness Blackstone, minister in charge of further and higher education, is not very keen on these kind of mergers. And the Further Education Funding Council has frowned on them in the past on the grounds that further education would lose out. Higher education will engage in an asset stripping exercise, the argument goes, and sell buildings just as the former polytechnics did when they became universities.

Last year, when Leeds Metropolitan University was seeking to merge with Harrogate College of Further Education, and Derby University with High Peak College, Baroness Blackstone wrote a letter to the Further Education Funding Council saying she did not wish to see general further education colleges merging with universities except in certain circumstances. She was against higher education money being used to rescue failing further education colleges; she disliked the functions of the two sectors being muddied; and she wanted further education to be a sector standing on its own.

For these reasons she said she was minded to reject the two mergers. The institutions were horrified, because they had been campaigning for years for merger, carefully building support and alliances. So, they fought back, and the mergers went through.

David Melville, chief executive of the FEFC, says of the Leeds Met/Harrogate merger: "The council looked very carefully at the merger proposal and were convinced this was the best way of securing further education in Harrogate, and ensuring new routes to progression to higher education. "All of which shows how difficult it can be to secure a merger even after you have been negotiating for years and have persuaded everyone in sight of the benefits. In these cases, there was a happy ending. And there are suggestions that we may see more marriages between the two sectors, the most important of which is the Government's policy for lifelong learning.

In Wales, for example, the higher education funding council has created a pounds 1m fund to encourage collaboration between further and higher education. It has already received one bid to create a community university of west and mid-Wales, bringing together five higher education and about 10 further education institutions in some sort of collaboration. Warner expects these kind of relationships to spring up all over the UK. "There's barely an institution in the country where, in the corridors or in formal meetings, something isn't being talked about," he says.

David Roberts, chief executive of HEIST, the marketing organisation for universities and colleges which is hosting the conference, says that the Government's push for lifelong learning means there has to be more collaboration between further and higher education - whether or not that means full merger. There are also big targets for growth in further and higher education. So, it's in the interests of new universities to have strong relationships with further education colleges because that's where students will come from.

But many experts in the two sectors wish Government ministers would establish a consistent strategy. Baroness Blackstone's desire to defend further education from the ravages of the universities does not sit easily with the requirements of lifelong learning. "If we want to build a system of lifelong learning, we have got to put together further and higher education," says Roger Waterhouse, vice-chancellor of Derby University. "I don't think the policy on lifelong learning amounts to anything other than rhetoric."

`How to Manage a Merger - Or Avoid One', pounds 9.95, published by Heist, The Coach House, 184 Otley Road, Leeds LS16 5LW. A conference is being held at Regent's College, London, Tuesday, 26 January. Contact Patricia Gray at Heist for further details: 0113 226 5858