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Moody’s: More mergers on the horizon

Mergers and restructurings are poised to rise in the global higher education sector in the coming years as the growing demand, increasing competition, and evolving funding models cause universities and governments to rethink their strategy. That is the prediction of a Moody’s Investor Service report, titled Global Higher Education Faces Period of Significant Transition, released on 23 February. The report notes that while demand for higher education will grow based on the enhanced career prospects and earnings offered by advanced education, universities will grapple with increased competition for students, faculty, research funding and philanthropy as a consequence of globalisation and new delivery models. 
The credit agency predicts that due to competing budgetary priorities, governments will be unable to fund higher education places to meet expanding enrolments, and students will bear a larger share of the costs over time. At the same time, many universities will be facing rising fixed costs as they take on the infrastructure costs previously covered by their governments, as well as rising pension and other post-employment benefit costs related to an aging university workforce. The funding squeeze will force more universities to pursue mergers and restructurings to achieve economies of scale and improve efficiency. The benefits of mergers include increased enrolment, size and broader range of academic programmes offered. According to the predictions, mergers of public universities will most likely be driven by governments, rather than individual universities, in part because of the political pressure to maintain public universities. Meanwhile, some private institutions with weak brand recognition will not withstand increasing competition and will be forced into closures. 
The past 30 years have seen 100 institutional mergers in Europe, according to the report. Of those, 28 mergers took place between 1985 and 2000, and 92 were carried out between 2000 and 2015.  Moody's