An Unlikely Pairing

Hilbert College is marrying outside the faith.

The four-year Roman Catholic nonprofit college in New York announced Wednesday that it would acquire Valley College, a for-profit career institution with four sites in Ohio and West Virginia. Hilbert officials and outside experts believe the merger marks the first time that a nonprofit religious institution has purchased a for-profit college, though they note parallels in the health-care sector, where Catholic hospitals have merged with or acquired nonreligious competitors.

And despite the unusual pairing, Hilbert College officials say the move makes sense.

“Hilbert College has a passion for providing students access to higher education, and we were looking for a partner to move from more of a local to a regional footprint and move into a circumstance that allowed us—with a partner—to expand the types of programs we offer as well,” Michael Brophy, president of Hilbert College, told Inside Higher Ed last week. “With that in mind, we found a great partner that provides a very transformative experience for their students.”

The Breakdown

Brophy is tight-lipped on the details of the deal and won’t share the cost of the acquisition. But he explained that Valley College is especially valuable to Hilbert—not only for expanding its market geographically but also as a pipeline of students for Hilbert’s online programs, which have grown in recent years.

Brophy sees the potential for students from Valley College, which is focused on short-term career preparation, to transfer to Hilbert to earn four-year degrees and other credentials.

“We do think this will be a significant boost to Hilbert College Global, our online program. Our hope is to use this relationship as a model to grow a strong vertical set of online programs that are needed across the country in terms of workforce development,” Brophy said.

While the acquisition will introduce many changes, some things will stay the same. For example, Brophy said the Valley College name will be retained, and its four campuses in Ohio and West Virginia, all of which are leased, will continue to operate as instructional sites.

“It’s certainly our view in the long term that there would be an opportunity for Valley College to grow, to remain true to their vision as a career college, but to also transition to not-for-profit status,” Brophy said.

The institutions will operate independently with separate accreditors but ideally have some shared services in nonacademic areas, Brophy said. While the details haven’t been fully hammered out yet, he said the two institutions will likely share procurement and other areas that may yield cost savings.

Both institutions will be held by a new nonprofit entity called Franciscan Services, a nod to the Roman Catholic order that founded Hilbert College in 1957 and still shapes campus values.

“Our intent with that holding company is to acquire Valley College and have both colleges essentially be part of a consortium that’s owned by Franciscan Services, which is an extension of the Hilbert College Board of Trustees,” Brophy explained. “It will allow both colleges to grow within a consortium-like environment, but to be able to thrive within their current accreditations and current missions.”

Valley College owner Tony Palmieri declined to discuss the financial specifics of the deal but said by email that the institution “has experienced stable, healthy growth over the last decade and is in good standing.”

An outside look at Valley College’s finances shows that the institution does appear to be on better footing than its more distressed for-profit peers, according to various federal data points. The financial composite score the Department of Education assigned Valley College is 1.8 on a 1.0-to-3.0 scale, slightly above the 1.5 score that signals financial responsibility. Valley College has also seen enrollment growth in recent years across all four locations; the largest, in Martinsburg, W.V., reported total fall enrollment of 621 students, according to federal data—up from 437 five years ago. Palmieri pegged recent total enrollment figures at “just over 1,000.”

Hilbert College is also in growth mode. Last fall, student enrollment numbered 901, up from 750 the previous year, campus figures show. Going further back, federal enrollment data show that Hilbert enrolled just 680 students five years ago.

This isn’t Hilbert’s first flirtation with another college. Previously, Hilbert and St. Bonaventure University—a nearby four-year Roman Catholic college—spent 18 months in merger talks only to walk away at the end without an agreement.

Brophy said the lesson learned from those talks is that Hilbert has no interest in losing its identity in a potential merger, and campus officials are happy to be on the purchasing side of the deal.

The Big Picture

Higher education is in a state of flux, judging from the steady stream of college closures and mergers and daunting market forces, which some analysts predict will become more severe in 2023. Mere weeks into the new year, Presentation College, a small Roman Catholic institution in South Dakota, announced that it would shut down after the summer semester ends, and at the very end of 2022, Holy Names University, another Roman Catholic college—also announced its impending closure due to financial difficulties.

Dennis Holtschneider, president of the Association of Catholic Colleges and Universities, noted that Hilbert is pursuing a growth strategy that looks to defy the demographic challenges in western New York, which has numerous religious institutions and a dwindling population.

The acquisition, he said, provides an entryway beyond the traditional campus. And it gives Hilbert a proactive strategy to stay ahead of market forces. With many colleges squeezed by declining enrollment, Holtschneider said they need innovative ideas.

“These schools have to do something; you can’t just have a strategy of hoping that others fail before you do. The best schools are thinking, ‘What do we do in this moment?’” he said.

Holtschneider also pointed out that Hilbert is singular among Catholic institutions for embracing online education as a major part of its strategy to sustain and grow enrollment.

“Everyone, of course, went further online during the pandemic. But as far as a major strategy, I don’t think that’s the case for a lot of our schools. In that sense, it’s new. What’s also new here is that this is a Catholic and a non-Catholic entity coming together. But the new partner isn’t becoming Catholic; they’re going to stay independent. So this is kind of a mixed marriage,” Holtschneider said.

John MacIntosh, managing partner of SeaChange Capital Partners, which manages the Transformational Partnerships Fund established by a number of philanthropic foundations to help colleges explore collaboration options, described the strategy as “buy or build.”

He noted that it isn’t unusual for an institution to expand its reach by purchasing another institution, pointing to the Northeastern University merger with Mills College, which gives the Boston-based research university a foothold in California on the site of a historic former women’s college. And purchases of for-profit colleges by nonprofit institutions are not unheard-of. In 2018, Purdue University made a big splash when it bought Kaplan University in an effort to ramp up its online offerings. The University of Arizona made a similar move in 2020, snapping up Ashford University. In both instances, the purchase price was low and emphasized acquiring a digital infrastructure to better serve online students.

What is unusual in this case, MacIntosh said, is the nature of the two institutions coming together, with a nonprofit religious college acquiring a for-profit secular institution focused on career training.

Purchases of For-Profit Colleges

While MacIntosh cautioned against generalizing about the pitfalls of for-profit education—a sector that has faced significant scrutiny in recent years—he acknowledged a potential benefit to students.

“The simple fact that a not-for-profit is buying a for-profit is a rare thing, and it’s generally a good thing,” MacIntosh said. “If the acquirer is mission-driven, as they should be and we expect they will be, then ideally the services that had been provided for profit are now being provided for mission-related reasons. Nonprofit education has proven to be better for students than for-profit education. I think the structure is uncommon, but from the outside, this sounds like a good thing.”

While Holtschneider noted that Hilbert’s pairing with Valley College is unusual, he suggested that higher education can learn lessons from the health-care world, in which Catholic hospitals have partnered with secular institutions to better serve local communities. And now that Hilbert is blazing a path with its acquisition of Valley, other colleges may follow, he said.

“When someone goes first, it always opens people’s eyes,” Holtschneider said.