DeVry acquisition raises concerns amid for-profit M&A trend

Education Dive

Dive Brief:

  • Troubled for-profit DeVry University, which enrolls around 46,000 students, is being acquired by a California venture capitalist in a deal some say isn’t getting the depth of examination it deserves from the Education Department, according to The Associated Press.
  • The prospective new owner is Bradley Palmer through his holding company Cogswell Education, which also runs a small for-profit college in San Jose. Some are concerned with Palmer’s lack of experience with large institutions and that he might be buying DeVry in order to profit on a resale. A Cogswell spokeswoman said it is going into the deal with “a long-term view” focused on student outcomes.
  • The Education Department has given its preliminary approval of the deal, requiring DeVry to maintain current enrollment levels and prohibiting expansion for one year. The department will also keep the $68 million DeVry was required to put up as collateral in case of failure.

Dive Insight

The future of for-profits may be mergers and acquisitions if the latest move by DeVry and other high-profile deals such as Purdue University’s purchase of Kaplan are any indication. The Education Department under Betsy DeVos has reversed or limited several Obama-era regulations of for-profit colleges and their accrediting bodies, allowing them to remain operational as the higher education industry weighs the merits of mixing models.

But such moves are not without their critics.

For example, when Purdue University bought the assets and operations of Kaplan University for $1 in 2017, some suggested it simply let the for-profit continue operations under the guise of a public nonprofit. The public Purdue affiliate resulting from the deal, Purdue University Global, kept Kaplan’s 30,000 students and 2,500 instructors and named its former president as chancellor.

Others see such deals as a way for nonprofit colleges to keep pace with demand for online education and give other institutions a model to follow. Kaplan was responsible for continued technical, maintenance and admissions support while Purdue managed the academic programs.

Acquisitions by nonprofit colleges aren’t the only way for-profits are seeking to remain viable. Last year, the Education Management Corp. sold 31 Art Institute colleges, among other for-profit colleges, to the nonprofit Dream Center Foundation, according to the Chronicle of Higher Education. The sale of publicly traded University of Phoenix to private equity investors was finalized in 2017.

And earlier this year Grand Canyon University got approval from its accreditor, the Higher Learning Commission, to change from for-profit to nonprofit status. The nonprofit entity will contract technological and other services from its former parent, a for-profit entity, the Chronicle reported.