A Glimpse Inside the Purdue-Kaplan Deal

ARLINGTON, Va. -- Purdue University was worried about being left in the dust by its peers when it came to online education. Don Graham, who headed Kaplan University's parent company, made the initial phone call to Purdue president Mitch Daniels that led to the deal between the two entities. And as negotiations between Purdue and Kaplan unfolded, Purdue "never got close" to seeing any problems or concerns that would have led the university to walk away from the deal, Daniels says.

Those were among a few nuggets of information that emerged Tuesday when two of the principals in arguably the most-talked-about deal in recent higher education history spoke about it at a conference at George Mason University's campus here. The conference, "Innovation and Public-Private Partnership in Higher Education," examined the growing trend in which colleges and universities work with outside providers to help them carry out key functions, increasingly on the academic side of their operations, such as online program management companies and international student pathways providers. (Note: The author of this article spoke at the conference.)

The centerpiece of the event, arguably, was the session in which Daniels and Graham (prodded gently by questions from Anthony Miller, the former Obama administration Education Department official whose private equity firm, the Vistria Group, now owns the University of Phoenix) offered a glimpse into the highly unusual deal in which Purdue essentially purchased the declining Kaplan University and struck a long-term deal in which Kaplan Inc. will provide many of the services needed to run the new institution, known as Purdue University Global.

This was an innovation-friendly crowd, so there was relatively little said about concerns from some faculty members and consumer advocates about the mixing of public and private elements and whether the Indiana public university has relinquished too much control to Kaplan.

Daniels acknowledged the possibility of "reputational risk" but described the due diligence Purdue engaged in, dismissing much of the potentially negative material that showed up in a massive search about Kaplan as "bunk."

"If anything had shown up that we wouldn't be proud to stand by, we would have [walked away], but it didn't," he said.

Instead, the Purdue leader focused on his motivations for not dismissing Graham's call when the former Washington Post publisher and head of Graham Holdings reached out to ask if Daniels might be interested in buying Kaplan University, which Graham's holding company had been quietly pitching.

"I called Mitch to say that I was thinking about a transaction for which you would be the perfect partner if you're interested," Graham said Tuesday.

Daniels said Graham introduced the call by saying he suspected it might be a very short call (because Daniels would dismiss the idea of buying Kaplan), but "we were happy to get our big, fat foot in the door," Daniels said.

Why? Because, Daniels said, for three straight years the Purdue president had given himself his lowest grade in his annual self-evaluation for the university's progress (or lack of it) in online learning. Daniels said he had been "really hesitant" to jump aggressively into digital education because he had seen other institutions make big bets and fail, "and I was pretty sure that would be our fate, too." But with online education certain to grow in the years ahead, "I didn't want us to be left behind," he said.

That's why it opted to turn to a company like Kaplan. Daniels conceded that the Purdue-Kaplan deal is unusual in higher education ("I can't name a real good analogue in the higher education world"), but he drew laughs when he said that there are "thousands of them in the real world." Companies, and increasingly governments, he said, are increasingly deciding to "get in a partnership or acquire competencies you don't have, someone out there [who] has been doing it all day long for a living."