Online Nursing Programs Drive Acquisition

Post University, in Waterbury, Conn., plans to acquire Denver-based American Sentinel University, a deal between two for-profit institutions allowing the larger Post to bolt on online nursing and health-care management programs as the global pandemic has exposed a deep need for trained health-care professionals.

The acquisition, announced Monday, can be viewed as part of an ongoing shift in college and university portfolios toward health care and other programs that potentially offer both students and universities immediate returns on investment. It can also be seen as a continuation of merger-and-acquisition activity at a time when financial stresses, enrollment pressures and changes in student demand are forcing consolidation among for-profit and nonprofit universities alike.

But it’s also noteworthy that the deal is taking place in an uncertain regulatory environment. Should it be consummated, it would very likely be among the first significant merger-and-acquisition activity announced and completed since President Biden moved into the White House last month.

Post and American Sentinel hope to close the deal this spring, pending regulatory approval. They didn’t disclose financial terms.

Their agreement calls for American Sentinel to become the American Sentinel College of Nursing and Health Sciences of Post University. American Sentinel would not relocate its operations from Denver, although many of its employees worked remotely even before the COVID-19 pandemic.

American Sentinel, which operates its programs entirely online, employs 106 people. It enrolled about 1,400 undergraduates and 1,300 graduate students in 2019, according to federal data.

That means it’s much smaller than the institution acquiring it. Post enrolls about 15,000 students. Most are online, with 1,200 or 1,300 studying on campus in Waterbury in a normal year, according to its president and CEO, John L. Hopkins.

Post, which employs slightly fewer than 2,000 people, does not plan layoffs after the deal closes, Hopkins said. American Sentinel’s founder and CEO, Rick Oliver, will remain with the company as chair of Sentinel U, a wholly owned business offering virtual nursing simulations and clinicals.

The Sentinel U product is sold to health-care institutions for use in nursing certifications, Hopkins said. It could also be used in Post’s professional studies offerings or in its schools of business, public service and education, and arts and sciences.

In other words, the pending acquisition comes with several different upsides for Post, which currently only lists an R.N.-to-B.S.N. nursing program online.

“It gets us into the nursing vertical,” Hopkins said. “It introduces some pretty terrific technology that we think can go well beyond nursing.”

Post and its leaders have been interested in a deal for quite some time. Leaders at the two universities have been in discussions for roughly a year, Hopkins said.

“Initially what had attracted me was the model, including the fact that they had this simulation technology,” Hopkins said, referring to Sentinel U. “Couple that with the rigorous program within the nursing vertical. It was something Post always had an interest in. I had always foreseen a nursing and health sciences school.”

The two sides signed a merger agreement Friday, prompting them to announce the deal after the weekend in order to inform their students and prospective students.

“We are very pleased about becoming part of Post University and believe this merger is in the best interest of our students to ensure growth and innovation in light of the rapidly changing health care and higher education landscape,” Mary Adams, president of American Sentinel University, said in a statement. “While we are a thriving institution today, joining Post University will make us stronger with access to enhanced support, expertise and resources. We believe our students, faculty, staff, healthcare partners and schools using our digital simulations will all benefit from this agreement.”

A private equity firm, Generation Partners, is Post’s controlling owner, Hopkins said. Several different investors own stakes in American Sentinel, which is controlled by its founder and CEO, Oliver.

Complicated M&A Environment

Experts in finance, health care and for-profit education who were not part of the deal saw numerous reasons that it would make sense for Post to acquire American Sentinel. They cautioned against viewing the development as only reflecting on for-profit colleges and universities.

The acquisition shows how universities are interested in bolstering health-care programs, said Daniel Pianko, managing director of University Ventures, an investment firm focused on higher education. It’s also reflective of a higher education ecosystem changing rapidly as employers seek different skill sets, the makeup of prospective students changes and students prioritize different experiences.

“I think you’re going to see deals continue at a pace in both the for-profit and nonprofit space,” Pianko said. “What you’re seeing is a reaction to the broader economy related to COVID.”

Still, the national regulatory environment is unclear as the Biden administration takes over from the Trump administration. Biden’s time as President Obama’s vice president raises questions about whether his Department of Education might echo Obama’s crackdown on for-profits.

That in turn might be enough to give potential for-profit university buyers pause.

The federal 90-10 rule is one regulatory test for-profit universities must pass. It requires for-profit institutions to draw less than 90 percent of their revenue from Title IV federal financial aid funds.

American Sentinel drew almost 45 percent of its revenue from Title IV funding, according to the most recently available collection of federal data, from the 2017-18 award year. That compares to 81 percent for Post.

In an uncertain environment, bigger can be better, said Trace Urdan, managing director at Tyton Partners, an investment bank and education-focused consulting firm. For the right pairing, combining resources and student populations can be wise even if it’s unclear how the regulatory environment will evolve.

“Kudos to them for getting this done in this environment,” Urdan said. “We really don’t know what the administration is going to do. There are some pretty good assumptions about re-embracing regulations that fell away during Trump, but the level of energy behind that makes all the difference. In that environment, which is about as uncertain as it gets, to be able to consummate a transaction, which is difficult even in the best of times, is pretty impressive.”

It can also be challenging to make deals work in the for-profit space because relatively few buyers are currently willing to pump cash into an acquisition, Urdan said. And cash, not equity, is what sellers typically want to receive.

“We’ve been in the market -- we know,” Urdan said. “Grasp that reality and say, ‘I’m not going to get cash,’ then you have to pivot to the concept of merger and say, ‘What’s better -- how can I improve my position? How can I improve the competitiveness and the stature and standing of this investment?’ Then merger makes a lot of sense.”

University leaders considered the timing of the deal, said Hopkins, Post’s CEO. When they started talks a year ago, it wasn’t clear whether the administration in Washington, D.C., would be changing or not. But they knew it was possible.

“At the end of the day, I guess the guiding tenet for us was it’s a really good business,” Hopkins said. “And we’re going to build the business for the long term.”