Boston-based Cambridge College, a private nonprofit institution, plans to acquire the for-profit New England College of Business and Finance, it announced Thursday -- moving to increase its size, ability to serve working adults, strength online and ties to corporate employers.
The deal combines two institutions of relatively small size and with a focus on adult, part-time and working students. Cambridge College reports head-count enrollment of about 3,700 students across three locations in Massachusetts -- Boston, Springfield and Lawrence -- plus California and San Juan, Puerto Rico. New England College of Business is entirely online with 1,500 students.
Nonetheless, the tie-up reflects national trends. Public and private colleges have sought to grow online through mergers, acquisitions and other arrangements with existing providers as demographic and other pressures make it increasingly hard to compete for students. Meanwhile, many for-profit institutions have been seeking to convert to nonprofit status after years of public scrutiny and regulatory pressure during the Obama administration.
It also represents the last chapter for a lingering component of the now-defunct Education Corporation of America, an Alabama-based for-profit chain that collapsed at the end of 2018 when it lost accreditation. The New England College of Business, based in Boston and with a history long predating Education Corporation of America, had a different accreditor than its parent company and was able to remain open.
Cambridge College’s acquisition is pending until regulators and accreditors give their approval. The deal is structured as an asset-purchase agreement. Upon the agreement's closure, Cambridge will have no further relationship with the New England College of Business’s current owner, Monroe Capital LLC. Plans call for Cambridge to create a new umbrella within its own structure for the acquisition, to be called the New England Institute of Business and Finance.
“In the near term, our goal is to keep them intact, because they have a wonderful business model,” said Cambridge’s president, Deborah Jackson, in a telephone interview Thursday. “What we hope the students will feel is they were online on Friday, they logged off, and on Monday they logged on and it will feel no different.”
Over time, Cambridge will work to fully integrate the two operations.
The acquisition would enable Cambridge to add 27 online programs spanning certificates to doctoral degrees. A key addition are associate degrees, which Cambridge is not currently authorized to offer, Jackson said.
“With the exceptional record that Cambridge College has built for close to 50 years, and its sound commitment to advancing a diverse body of adult student learners, this affiliation will enable NECB to expand its reach to a broader universe and to have expanded resources with which to do so,” the New England College of Business’s president, Howard Horton, said in a statement.
Horton will be executive director of the New England Institute of Business and Finance once it’s set up within Cambridge College.
Additional terms of the deal, including any purchase price, are not being made public at this time. The two sides are working to close in a short time frame, which could affect some of the mechanics of the acquisition, said Cambridge’s chief financial officer, John Spinard.
“The way it is structured as an asset-purchase agreement helps mitigate the risk that Cambridge College was taking on, as well as offer us the opportunity to acquire this book of business,” he said in a telephone interview. “I would say the terms were favorable.”
Although Cambridge is the buy side in the transaction, it didn’t initiate the deal. The New England College of Business was reaching out to colleges in the Boston region, Jackson said. She and Horton first talked in December, and more formal discussions between the two sides began in January.
“We both are committed to serving adult learners,” Jackson said. “We realized we really were focused on the same cohort, the same population, and are probably the only two institutions in this area fully committed to the adult learners.”
Cambridge also sees opportunity to grow in size and connection to corporate America. Its leaders estimate the New England College of Business will add between 30 and 35 percent to its top-line tuition revenue. Over the last five years, the New England College of Business has demonstrated positive net income and operating cash flow, according to Spinard.
That could be important for Cambridge College, where tuition and fees booked as revenue slid from $41.9 million in its 2009-10 fiscal year to about $22 million in 2017-18, according to federal tax filings.
Cambridge is extending employment offers to the New England College of Business’s faculty and staff. The college being acquired has about 35 employees plus 80 adjunct faculty members. Cambridge employs about 150, plus 20 faculty members and 300 adjuncts, many of whom are professionals who teach nights and weekends, Jackson said.
She touted the New England College of Business’s corporate connections. Its students come from 300 different corporate partners. Many of those companies pay for employees’ tuition.
“Part of our strategy at Cambridge College has been to broaden our network of corporate partners,” Jackson said. “Corporate partners are the primary source of their students. And those corporate partners, when they send their students to NECB, they are actually covering tuition.”
Insiders knew that Monroe Capital was seeking to change the New England College of Business’s status. The college was a “great little jewel of an asset” that emerged from Education Corporation of America’s meltdown “unscathed” with a “reasonably strong reputation,” said Trace Urdan, managing director at Tyton Partners.
Urdan had informal conversations with some of the college’s owners but didn’t represent them in any way. They were exploring a range of options from converting the institution to a nonprofit to spinning out services and functioning as an online program manager, he said.
“They were trying to figure out what to do,” he said. “I was not aware they were in conversation with Cambridge, but seeing that resolution does not surprise me.”
From the seller’s perspective, the only reasonable move in this environment is to convert to a nonprofit institution, Urdan said. Selling to Cambridge accomplishes that. And from Cambridge’s perspective, the acquisition provides a foundation for growth and more online capabilities.
Part of a Trend
Similar deals in which nonprofit institutions acquired for-profits include National University acquiring North Central University in a move announced in 2018. A public institution, Purdue University, acquired Kaplan University to form Purdue Global under a 2017 agreement.
Those acquisitions involved much larger operations and thousands more students than the one announced Thursday.
Urdan said future cases in which nonprofits acquire for-profits are likely on the way, especially involving for-profit institutions with solid reputations.
To some, the New England College of Business stands out from other for-profits -- even its former owner -- in part because of a unique history and niche. It was founded in 1909 by the New England banking industry. It is accredited by the New England Commission of Higher Education, the regional accreditor for the area, and has traditionally focused on working professionals in the business and financial industries.
The number of such esteemed colleges could be a limiting factor for future deals. But that limit could lift over time.
“There aren’t a huge amount of assets, and there aren’t a whole lot of them of a sufficient caliber and quality that a nonprofit would be comfortable acquiring them,” Urdan said. “Let enough time go by. This becomes more mainstream, and even some of the schools you would think would be too hot to touch would fall into this category.”
For now at least, for-profits selling to nonprofits continue to draw attention from consumer advocates. Clean acquisitions in which a nonprofit college takes full control of the for-profit are likely to be a positive for quality and consumer protection, said Bob Shireman, a former deputy undersecretary of education in the Obama administration who is now a senior fellow at the Century Foundation. Not all transactions are structured that way, though.
“Some transactions have left the former owners in a position to control and profit, which is misleading to consumers and often an attempt to dodge regulation,” Shireman said in an email.
In addition to size and scale, some deals between nonprofit and for-profit institutions are likely to be driven by a need for traditional nonprofit colleges to add certain abilities. As some experts expect students to grow older on average and increasingly be working as they attend class, campuses may need to add abilities like serving adult students and better coordinating rolling admissions.
Public institutions could be the next set of colleges and universities to add those capabilities by acquiring and absorbing for-profit institutions, according to Urdan. Most public universities have online programs, but they aren’t always as effective as top competitors -- a gap in their missions to serve the public.
“They’re all having these conversations right now,” Urdan said. “It’s just the politics are daunting to get something like this done.”