Speaker 1: Bloomberg Audio Studios, podcasts, radio news. American higher education is
Speaker 1: facing a crisis, a few of them really. One of
Speaker 1: them is economic. Increasingly many colleges and universities are struggling,
Speaker 1: and some of them have had to shut down. What's
Speaker 1: causing this, at least in part, is the number of
Speaker 1: high school graduates in the United States is on the decline.
Speaker 2: There's a demographic cliff, as they like to call it.
Speaker 2: By twenty thirty seven, there will be a ten percent
Speaker 2: decline in students that go to college.
Speaker 1: Francesca Maglione covers personal finance and higher education for Bloomberg,
Speaker 1: and she says that at the same time that the
Speaker 1: pool of prospective students is shrinking, colleges are under pressure
Speaker 1: to offer them more, more perks, more gyms, and other
Speaker 1: new buildings dorm rooms that are more luxurious. But Francesca says,
Speaker 1: there's a university that's trying something different.
Speaker 2: So in Northeastern, for many decades was known as a
Speaker 2: commuter school, kind of just filled with local students, really
Speaker 2: trying to compete against all of the other colleges in Boston,
Speaker 2: Boston College, bu Harvard.
Speaker 1: Of course, in recent years, Northeastern has set its sites
Speaker 1: beyond Boston, and its administrators have used a playbook that
Speaker 1: Corporate America has developed and deployed. The new Northeastern is
Speaker 1: barely recognizable.
Speaker 2: It's really transformed over the years to kind of have
Speaker 2: this big international recognition. They have a lot of international
Speaker 2: students and they've also grown tremendously, so they really did
Speaker 2: a complete flip up of what they were before.
Speaker 1: As some of Northeastern's competitors struggle, it is growing a lot.
Speaker 1: A decade ago, the school started buying up and merging
Speaker 1: with colleges that were foundering.
Speaker 2: They had their first campus outside of Boston in twenty eleven.
Speaker 2: Now they have fourteen campuses and they have three abroad.
Speaker 1: In some ways, it's been a success, and other schools
Speaker 1: have taken note, but Northeastern's transformation has not been seamless.
Speaker 1: There have been clashes over campus culture and curriculums and protests.
Speaker 1: Samel's College Samals College shows it's the rare merger that's
Speaker 1: harmonious when companies are involved, and it turns out the
Speaker 1: same is true with colleges. I'm David Gerra, and this
Speaker 1: is the big take from Bloomberg News on today's episode.
Speaker 1: Using the private equity playbook in academia, what's worked for Northeastern,
Speaker 1: what hasn't, and how that university's aspirations could reshape American
Speaker 1: higher ed colleges and universities in the United States are
Speaker 1: facing a financial reckoning, and according to Bloomberg's Francesca Magleone,
Speaker 1: it's coming to a head.
Speaker 2: A lot of people don't like to think of colleges
Speaker 2: as businesses, but they are, and their main clients are students.
Speaker 1: Of course, and Francesca says some of those prospective clients
Speaker 1: are wondering if it's worth it to pay hundreds of
Speaker 1: thousands of dollars to get an undergraduate education. That's one challenge,
Speaker 1: but colleges and universities face others, especially smaller schools.
Speaker 2: They're competing for students across the nation. Again, the number
Speaker 2: of students is declining. COVID also was a big hard
Speaker 2: hitter for colleges. They lost many students and costs went
Speaker 2: exponentially up, something that for example, Harvard or Princeton doesn't struggle.
Speaker 2: They have these massive endowments.
Speaker 1: Billions of dollars.
Speaker 2: Yeah, literally live for forever with these endowments, and that's
Speaker 2: something that a small school doesn't have, and so a
Speaker 2: dip and enrollment is a massive hit.
Speaker 1: Administrators at Northeastern University, which has been in Boston for
Speaker 1: more than one hundred years, noticed these trends, and Francesca
Speaker 1: says they saw an opportunity.
Speaker 2: Northeastern has been really strategic at a moment where a
Speaker 2: higher education is going through tremendous windfalls. So something that
Speaker 2: they've started to do around twenty nineteen is that they
Speaker 2: took a look at the landscape and they saw that
Speaker 2: all of these small private colleges were closing due to
Speaker 2: dwindling enrollment. And so what they've done is that they
Speaker 2: are in a very unique position to be acquiring these colleges.
Speaker 1: Which is what they've been doing now. M and A
Speaker 1: is not something that happens a lot in the world
Speaker 1: of higher education, but Northeastern decided to go all in.
Speaker 2: They've decided that at a time when colleges are competing
Speaker 2: for students, they're just going to make it as easy
Speaker 2: as possible for people to go to Northeastern no matter
Speaker 2: where you are in the US and even abroad. So
Speaker 2: they've bought three colleges so far. Their first acquisition was
Speaker 2: in twenty nineteen it was a small college in London.
Speaker 2: Then their second acquisition was in twenty twenty two, this
Speaker 2: all women's college in Oakland, California called Mille College, and
Speaker 2: then they've recently announced their third acquisition in New York.
Speaker 2: It's like a theater arts school in the Upper east Side.
Speaker 1: That would be Marymount Manhattan College. It has around fourteen
Speaker 1: hundred full time students and it's known for its performing
Speaker 1: arts program. Of course, there are hundreds of colleges that
Speaker 1: fit this description across the country. I asked Francesca what
Speaker 1: does Northeastern look for when it's thinking about an acquisition.
Speaker 2: One of the first things would be real estate, Like
Speaker 2: when you think about their latest merger in Marymount, they
Speaker 2: just acquired a school in the Upper east Side with
Speaker 2: three buildings in New York. That's a really hard market
Speaker 2: to get into in higher education, and all they have
Speaker 2: to do is kind of smaller liabilities and their assets,
Speaker 2: and they're good to go with mills. For example, they
Speaker 2: had seven hundred million dollars in assets. They had PubL Picassos,
Speaker 2: they had Diego Riveras, they have an extensive portfolio that
Speaker 2: they also acquired. So I think that's like a major
Speaker 2: attraction for these mergers. These schools have these valuable assets
Speaker 2: that they just can no longer continue to work with,
Speaker 2: and by acquiring them, you kind of continue their life.
Speaker 1: Could you contrast what Northeastern is doing with what I've
Speaker 1: seen and YU doing, which is to sort of think
Speaker 1: of itself as a global institution, open up these campuses
Speaker 1: in Europe and Asia. Be you following a similar model?
Speaker 1: How is this kind of unique what Northeastern is doing.
Speaker 2: NYU hasn't really bought any colleges. Northeastern started buying colleges
Speaker 2: in twenty nineteen. They're buying struggling businesses quote unquote, and
Speaker 2: they're kind of flipping them around. And that's also how
Speaker 2: they're different from what you would think of a traditional
Speaker 2: college or the most the oldest colleges. It's more like,
Speaker 2: the bigger we grow, the more students that we can
Speaker 2: tailor to, the better we'll be off. How proactive have
Speaker 2: they been They have a team dedicated to this. Leaving
Speaker 2: their team is this woman called Mary Ludden. She used
Speaker 2: to work in healthcare for twenty years. Even that's the
Speaker 2: first indication that they're behaving like a business. They're hiring
Speaker 2: people from outside of Higher Education. They have three teams
Speaker 2: within this merger's desk. The first team is dedicated to
Speaker 2: finding new colleges or finding new opportunities within the market.
Speaker 2: The second team is dedicated to integrating the colleges once
Speaker 2: they've been acquired, and the third team is responsible of
Speaker 2: kind of making everything flow once the college is fully
Speaker 2: acquired by Northeastern.
Speaker 1: And this mergers and acquisition team has been pretty successful.
Speaker 1: Francesca says that almost fifty schools have expressed interest in
Speaker 1: working with them, and other colleges and universities are looking
Speaker 1: at what Northeastern has done, what it's doing, wondering if
Speaker 1: this model could work for them.
Speaker 2: I guess Northeastern is unique because they're kind of taking
Speaker 2: this private equity approach. I don't know if they'll love
Speaker 2: the private equity analogy. I don't think they will, but
Speaker 2: it is at the highest levels kind of what they're doing.
Speaker 2: They're taking these struggling businesses and making them stay alive.
Speaker 1: But none of this is happening without controversy. There have
Speaker 1: been growing pain, especially for students. We'll get into that
Speaker 1: after the break. There are advantages to what Northeastern University
Speaker 1: has done. How fast it's expanded and how big it's grown.
Speaker 1: But Bloomberg's Francesca Maglione says some of that has come
Speaker 1: at a cost. Each college has its own culture, its
Speaker 1: own way of doing things, and that changes when one
Speaker 1: school merges with another, or when a college or university
Speaker 1: buys another one.
Speaker 2: This is one of the pain points for a Northeastern.
Speaker 2: It's one of the growing pains when they had this
Speaker 2: Mills merger in twenty twenty two.
Speaker 1: Mills College, this was the school with the Picassos and
Speaker 1: the riveras located in Oakland. It had been losing students
Speaker 1: for years and finally Mills announced plans to close its doors.
Speaker 2: And then Northeastern jumped in and said, wait, no, you
Speaker 2: don't have to close. We'll save you. And then they
Speaker 2: started sending students that had applied to Northeastern to attend
Speaker 2: a semester at Mills. So this at the beginning the
Speaker 2: transition is kind of rough because you have students that
Speaker 2: chose to go to Mills before it turned into Northeastern,
Speaker 2: and then students that chose to go to Northeastern, and
Speaker 2: so there's a bit of a clash there. At the beginning,
Speaker 2: there were protests apparently alumni and made these shirts that
Speaker 2: said F you and you. I spoke to a student
Speaker 2: that was one of the first students that came from
Speaker 2: Northeastern to study at Mills, and she said that it
Speaker 2: was really uncomfortable like that. She just felt like the
Speaker 2: Mile students really did not want the Northeastern students to
Speaker 2: go there. The Mill students are students that you wanted
Speaker 2: to go to college to change the world. There was
Speaker 2: a very social justice focused program, and then you have
Speaker 2: these Northeastern students that are coming in with a completely
Speaker 2: different perspective.
Speaker 1: There were these cultural clashes, but there was also backlash
Speaker 1: when Northeastern changed the college's curriculum.
Speaker 2: Something that also a lot of students were guts bothered
Speaker 2: about was that when merger completed, students that were still
Speaker 2: there had to take additional prerecs or things like that
Speaker 2: that were under Northeasterns requirements. And I think that all
Speaker 2: of the class that they had taken at Mills were
Speaker 2: then considered as like transfer credits to their new institution.
Speaker 1: Meanwhile, as Northeastern's profile has grown, so has enrollment. It's
Speaker 1: up fifteen percent since twenty nineteen, but a bigger student
Speaker 1: body has also put pressure on Northeastern to expand to
Speaker 1: accommodate all those new students.
Speaker 2: I think that students feel the growth. Boston at the
Speaker 2: end of the day is a city. They're limited by
Speaker 2: the fact that they're in the city and not in
Speaker 2: the middle of nowhere where they can continue to grow
Speaker 2: of forever. And so students mention, you know, being shouldered
Speaker 2: to shoulder walking through campus during rush hour, being three
Speaker 2: people sleeping in a dorm. Students have even been put
Speaker 2: in hotels at points, So I think students really feel
Speaker 2: that strain. Like the library, there's never an open seat
Speaker 2: at the library. I think that they feel this out
Speaker 2: of much great ater scale.
Speaker 1: According to Francesca, Northeastern says it's working hard to learn
Speaker 1: from these missteps.
Speaker 2: That's something that they're trying to do better with this
Speaker 2: Marymount merger. For example, they announced this merger, they haven't
Speaker 2: sensed students. They said that they're hoping to send students
Speaker 2: in twenty twenty five, kind of in a way, giving
Speaker 2: the school some time to get ready for their arrival.
Speaker 1: As Northeastern grows, as it adds more real estate and
Speaker 1: students and brings in more tuition dollars, as a result,
Speaker 1: there's this question of whether other schools will follow in
Speaker 1: the university's footsteps. What's your sense of how other schools
Speaker 1: are looking what Northeastern is doing. Do they see this
Speaker 1: as a model that they can replicate. Do they worry
Speaker 1: that they've missed the curve that Northeastern is pioneered something
Speaker 1: here that maybe they'd like to do, but now they
Speaker 1: feel too far behind.
Speaker 2: I think it depends on the school that you are.
Speaker 2: We spoke to this private equity investor that has donated
Speaker 2: to Northeastern and he said, you know, if Sam Walton
Speaker 2: would have done just that one Walmart, it would have
Speaker 2: probably been a great Walmart, but it wouldn't be Walmart.
Speaker 1: My last question is, so where does this end. They
Speaker 1: have entered into all these mergers, all these deals. What's
Speaker 1: the goal for Northeastern long term?
Speaker 2: They're interested in growing, you know, they want to continue growing.
Speaker 1: They world domination, world domination.
Speaker 2: They they have heard from almost fifty schools that are
Speaker 2: interested in working with them. They right now I think,
Speaker 2: are focused on, you know, implementing this latest campus that
Speaker 2: they've acquired. But since twenty nineteen, they've acquired three schools.
Speaker 2: That's a massive undertaking. Acquiring a school is really complicated,
Speaker 2: So I think that they're really interested in continuing to
Speaker 2: do this, and they will teut their application numbers, and
Speaker 2: you know, there's demand for this kind of education and
Speaker 2: they have that room to continue to grow. Are we
Speaker 2: going to see this massive consolidation of all these smaller
Speaker 2: schools kind of falling under these more known brands. I
Speaker 2: don't know if that's going to be the case, but
Speaker 2: I think that a lot of people that look at
Speaker 2: this market and study this market think that's some sort
Speaker 2: of model related to what Northeastern is doing is probably
Speaker 2: going to be the way forward for.
Speaker 1: This is the big take from Bloomberg News. I'm David Gora.
Speaker 1: This episode was produced by Adriana Tapia. It was edited
Speaker 1: by Stacy Vanick Smith, Craig Giamona, and Brian Chapatta. It
Speaker 1: was fact checked by Jessica bec It was mixed by
Speaker 1: Blake Maples. Our senior producer is Naomi Shaven, who helped
Speaker 1: edit this episode. Our senior editor is Elizabeth Ponso. Our
Speaker 1: executive producer is The Cold Beamster Boor. Sage Bauman is
Speaker 1: Bloomberg's head of Podcasts. If you liked this episode, make
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