Tag: INTOUniversityPartnerships

Officium….Conflictus

A 2020 Harvard Law School Forum on Corporate Governance claimed that “…the overall state of JV governance is still not good.”   The same Forum offered a piece in 2019 which explicitly discussed the “JV Directors Duty of Loyalty” and begins “Many joint venture board directors find themselves in a perceived state of conflicted interest.”  It’s relevant reading when the court case1 between INTO2 and University of South Florida financing Company (USFFC) shows the Secondary Case3 naming four employees of the University of South Florida (USF) as defendants. 

These individuals were appointed by USSFC as directors on the Joint Venture between USF and INTO University Partners (IUP), with one of them serving for just a single day on the joint-venture Board.  The defendants, Jennifer Condon, Karen Holbrook, Nick Trivunovich, and Ralph Wilcox are collectively referred to in the submissions as the “Former USFFC-Designated Joint Venture Directors.”4. INTO’s claim is that, “As a result of the USF Parties’ threats and failure to perform their contractual obligations, as well as the Former USFFC-Designated Joint Venture Directors’ breaches of their fiduciary duties to the Joint Venture and INTO USF LPLP, Plaintiffs have suffered and continue to suffer financial harm in the tens of millions of dollars.”5.

INTO Claims Against the Individuals as Count V

The INTO claim for “Breach of Fiduciary Duty Against the Former USFFC-Designated Joint Venture Directors.” is Count V of their complaint6.  The assertion is that they, “..breached these duties by continuing to serve on the Joint Venture’s board of directors with knowledge that USFFC and USF intended to and did purport to terminate the USA despite the Former USFFC-Designated Joint Venture Directors’ serious conflicts of interest.”

In the same Count, two of the four are further accused that they “..breached their fiduciary duties by actively advocating for the baseless termination of the USA [University Services Agreement]..” and that “Their advocacy for termination of the USA was motivated by their concern for the advancement of USF, not the Joint Venture or INTO USF LP, and their loyalty to USFFC and USF, whose interests they put before those of the Joint Venture and INTO USF LP.”

There is the further suggestion that, “The Former USFFC-Designated Joint Venture Directors breached their fiduciary duties by resigning as directors and leaving the interests of the Joint Venture and INTO USF LP without proper care.”

This was not the first time the question of conflict of interest had come up but it was an interesting reversal from an earlier accusation by Fell. L. Stubbs, Treasurer of USF and Executive Director of USSFC.  On 13 May 2 he sent a memo alleging that “While INTO has continuously accused the USF FC appointed directors of conflicts that they have taken care to appropriately manage, INTO has not done the same. For instance, Anmar Kawash, an INTO appointed director to INTO USF, continues to represent the stockholder and IUP in the parties’ dispute.”7

Defendant’s Response and Motion to Dismiss Count V

The defendant’s response on 3 November8 was a Motion to Dismiss Count V claiming, “The ultimate issue…is whether the University of South Florida (“USF”) correctly terminated its University Services Agreement (“USA”) with the Company [INTO USF Inc,.  It continued,“But that simple breach of contract case has exploded into an eight-count diatribe against any person or company that provided information to USF or agreed with the termination decision….”  In addition to claiming that the individuals acted in ways that were “contractually agreed” and which they were “entitled to” do the response asserts that “…this lawsuit is the INTO Entities’ way of exacting revenge and forcing anyone who reported to USF about the Company’s financial distress to pay the penalty.”

In seeking the Motion to Dismiss there are claims the action is barred by sovereign immunity, absolute immunity and corporate “primacy of contract” doctrine, as well as failing to show a cause of action.  There is a specific argument that the individual who was a director for one day “did not take part in any of the conduct about which the INTO Entities complain” because the appointment was made after “the SHA was terminated.” 

Request for Production and a Further INTO Response on Count V

On 9 November INTO issued “Requests for Production”9 to each of the four individuals covering the period from January 1, 2019.  The main elements requested are “all documents relating to the lawsuit”, “All documents and communications relating to the February 2022 board meeting”, “All documents and communications relating to Your resignation as a director of the Joint Venture”, and “All Your notes or minutes from any meetings, whether in person or remote, involving You relating to the Joint Venture and/or Plaintiffs”.

On 23 November INTO filed its response10 to the defendants’ Motion to Dismiss of 3 November, claiming “It is difficult to imagine a clearer example of divided loyalties and breach of fiduciary duty than the one laid out in the Amended Complaint.”  The Response lays out its reasons for this claim and makes legal points against the assertions of immunity and other arguments for dismissal.  The argument related to the individual who was a director for one day states that she “..breached her fiduciary duties to the Joint Venture by resigning from her position as Joint Venture director, leaving the Joint Venture without proper care..”

The Defendant’s Reply to INTO’s Response on Count V

To a casual reader, the Reply for the defendants’ on 2 December11 adopts a tone that mixes legal argument with language that a detached observer might consider scornful.  On sovereign immunity they say, in a “gotcha” moment, “Given this law, the INTO Entities pled directly into the sovereign immunity defense.” and conclude, “This end-run on USF’s sovereign immunity is futile.” 

On Primacy Doctrine they suggest, “The INTO Entities confuse substantive and procedural law, as well mutually exclusive remedies.”  On the failure to “state a cause of action” against Jennifer Condon they state, “The INTO Entities’ ineffectual response shows nothing more than their scorched earth policy.”  This looks like a level of rhetoric which one assumes a judge will calmly sift through and ignore while considering the facts of the case.

Breaking Up Is Hard To Do

When Neil Sedaka released the song in 1962 he sang “Think of all that we’ve been through and breaking up is hard to do.”  The current court saga certainly seems a long way from 2010 when IUP and USF began their partnership.  Or even May 2013, when IUP founder Andrew Colin received a Global Leadership Award from the University of South Florida in recognition of his contribution to international education. 

The intervening years may have led to a point where speculation about the “end of the long-term joint venture” model has become a reality.  It may even give other joint venture directors pause for thought about the governance model they work under, the obligations they might have and the legal cover that is offered for disputes.  In this case a moment of truth may come on 25 January 2023 when a hearing is scheduled to hear the motion to dismiss Count V on the grounds of sovereign and absolute immunity12.

NOTES 

This blog reflects on complex legal issues and makes no assertions in support of or against any of the parties involved. References are provided for readers wishing to read more detail. Any authoritative corrections on matters of fact are welcome.

All filing references relate to documentation filed with The Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida Circuit Civil Division.  Further information about the case including the lawyers representing the parties are included in a previous blog.

  1. In the Consolidated Lead Case CASE NO.: 22-CA-006001, Div. L, USF Financing Corporation (USFFC), a Florida not-for-profit corporation, is the Plaintiff while INTO USF LP, a Delaware limited partnership, and INTO USF, INC., a Florida corporation are the defendants (Filing # 156524107 E-Filed 08/31/2022).
  2. As INTO USF LP and INTO USF, INC., are the listed parties in the cases the term INTO is used to describe them in this blog.
  3. In the Secondary Case INTO USF LP, a Delaware limited liability partnership, and INTO USF, INC., a Florida corporation, are the Plaintiffs, while USF FINANCING CORPORATION, a Florida not-for-profit corporation, and THE BOARD OF TRUSTEES OF THE UNIVERSITY OF SOUTH FLORIDA, Defendants.  The amended complaint (Filing # 157809124 E-Filed 09/20/2022) added the four individuals.
  4. Filing # 157809124 E-Filed 09/20/2022  
  5. Filing # 157809124 E-Filed 09/20/2022
  6. Filing # 157809124 E-Filed 09/20/2022
  7. Filing # 153460265 E-Filed 07/15/2022 Exhibit G
  8. Motion and Incorporated Memorandum of Law to Dismiss Count V of the Amended Complaint Against the Former USF FC-Appointed Directors Filing # 160604060 E-Filed 11/03/2022
  9. Filing # 160982138 E-Filed 11/09/2022
  10. Filing # 161827652 E-Filed 11/23/2022
  11. Filing # 162259450 E-Filed 12/02/2022
  12. Filing # 162395119 E-Filed 12/05/2022

Image by Mohamed Hassan from Pixabay 

Pathways Pivot for India?

E.M. Forster suggested we should “mistrust all enterprises that require new clothes”2 but Shorelight has restyled its website and is offering aggregator type filters which reflect a change of direction.  The filters help clear up what’s been going on with their portfolio and suggests that the pressures on their pathway offerings are causing them to pivot at pace.  The site gives a clear sight into the dash for direct recruitment partners that looks to be the increasingly popular modus operandi for all pathway operators. 

Searching suggests that a “groundbreaking new partnership”, signed with Mercer University in October 2018 who were described as “an exemplary partner for Shorelight” at the time, doesn’t even make the roster in 2022.  The pathway program in the fifteen year contract with the University of Kansas signed in 2014 seems to have come to an end just eight years later.  And the pathway with the University of Central Florida (UCF) heralded in 2013 as “another big win for the students of an institution that is clearly on the move” is also over.

Only nine university partners are shown offering the full service of undergraduate and postgraduate pathway option with direct recruitment in both.  Leaving aside the three American Collegiate offerings there are a total of 14 undergraduate pathways and 12 postgraduate pathways.  It’s a complex offering, including three which are postgraduate direct recruitment only and with some significant restrictions – the Johns Hopkins University choices appear to be for engineering programs only.

UG Direct Only11
UG Direct and UG Pathway Option (no PG)14
PG Direct Only3
PG Direct and Pathway Option (no UG)12
PG and UG Direct with Pathway Options in both9
UG and PG Direct Only (no pathways)12

For new readers, the American Collegiate offering is a “choice” program hosted by American University in Washington DC and with courses through UCLA Extension in Los Angeles.  The goal is then to transfer to an institution that will accept the credits.  American Collegiate Live offers online courses taught by UMass Boston and bearing academic credit with “full recognition” by 13 universities

The Past Is a Different Country1

When Elizabeth Redden reviewed the US pathway scene for InsideHigher Ed in 2018 she commented, “With a few notable exceptions, both Shorelight and INTO tend to contract with large institutions, and their partnerships tend to be larger scale.”  Those days seem long past with Shorelight’s burgeoning list including a long string of smaller, regional colleges.  INTO’s closures at Washington State University and Colorado State University also suggest the game has changed irrevocably.

For completeness, the current state of relationships3 on major pathway operator websites shows:

 Current Total US PartnersCurrent US With Pathway*Closed in US Since 2018**
Shorelight42183
INTO1193
Navitas317
Study Group958
  • *Excludes American Collegiate
  • **Pathway announced/operational but no longer shown

It is difficult at this point not to recall the ill-fated words of Karen Khemka, a partner with the Parthenon Group, who said in 2014, “The U.S. third-party/outsourced pathway market is less than half the size of the Australian market despite having a higher education system that is 10 times the size. We anticipate that growth will be constrained only by the pace at which private providers can develop the market.”  It came towards the end of a period when private equity invested over a billion dollars in pathway operators but as I asked in a 2018 blog, “..has attention to the supply side of the equation ignored the challenges of changing patterns of demand around the world?”

Unless We Remember We Cannot Understand1

Curiously, the pathway operators inverted the equation when they were promoting the growing supply of students to meet the demand of universities in the traditional recruiting countries of the US, UK and Australia.  They quoted the dubious “8 million globally mobile students by 2025” mantra and largely ignored the potential growth of inter-country competition, relatively low cost of entry for new pathways, the rising cost of acquisition as agent and student choice grew, and the threat of substitute products through technology.  Ignoring one of Porter’s Five Forces seems poor business sense but shunning all five seems less than sensible when you are investing significant amounts of money.      

One talented US leader, running the American portfolio of a UK-based pathway operator, posed these fundamental questions shortly after INTO celebrated its £66m investment from Leeds Equity and Shorelight’s launch.  The company carried on regardless, although US losses mounted, the quality of partners declined and the UK operation stopped adding new partners.  As the Trojans found, it is unwise to ignore the insights and prophecies of a truth telling Cassandra.

Other observations that were rarely heard out or given sufficient attention included:

  • the home of the pathways in Australia and the UK were 13-year schooling systems where the Foundation year of a pathway completed a fundamental requirement. This gave an ideal opportunity for language tuition and academic skill development.  US universities already took students after 12 years schooling and those with larger international cohorts often had well developed ELIs to accommodate language needs;   
  • recognition that the bubble created by fast-growing demand from China, particularly at undergraduate level, was coming to an end as demographics changed;
  • understanding that the bounty of state-sponsored language students was fading fast and unlikely to be replaced;
  • for many US universities the attraction of students paying out of state fees was as attractive financially as international students and seemed more accessible as a market;
  • the best US universities could already recruit if they wanted to and so the opportunities to have great brand names on the website was always going to be minimal.

A Room With A View?1

While new recruitment markets are emerging they are quite different in character and nature.  The growth in students from India has led to a demand at post-graduate level, often without the need for significant English language or pathway academic skills.  It seems likely that Shorelight’s willingness to take on direct recruitment for less well-known institutions reflects the reality that those students are less brand conscious, looking for lower fees and are more focused on a qualification that gives them post-study work options.

It may be a model that is less stable and less lucrative than the pathway model appeared to be in the early part of the 21st Century but INTO and Shorelight have found the going very tough at many of their US pathways and need to do something.  As INTO launches its new strategy there may even be a longer term appetite for uniting forces with Shorelight in the US to become a super-dominant player.  Bringing the two groups together would offer a large direct recruitment portfolio, allow some selective reduction in competing or uncompetitive institutions, fill a gap in terms of online technology for INTO and should enable significant reductions in overheads.

All of these types of potential mergers are riddled with questions about existing financial arrangements, for example Huron Consulting has $40.9 million in convertible debt in Shorelight Holdings LLC maturing in January 2024, competing institutions and cultural fit.  But when the CEO of INTO is talking explicitly about “lighter touch, lower investment” (The PIE live interview, 11 July 2022) ways of having discussions with universities, it seems reasonably clear that there is a shared interest in building non-pathway relationships.  The real question will be whether the new era for organizations that cut their teeth on pathways can drive enough revenue and profitability to be worthwhile and whether consolidation offers added value.   

Of course, it may also be that the days of the recruitment behemoths are over.  Twenty years of pathways has created some highly skilled individuals with strong in-country contacts who could simply choose to go solo with a smaller portfolio of hand-selected university names.  Faced with a choice between being one of eight names in a portfolio or being in the bag of a sales team with 37, 48 or even 100 different products to promote, a smart university might choose to be in a select pack rather than a faceless herd.

Notes

  1. Shameless use of E.M. Forster book titles and quotes throughout the article.
  2. Apparently, Forster adapted this quote from Henry David Thoreau
  3. It is not always easy to interpret the websites of pathway operators and I am happy to accept authoritative and evidenced corrections and note amendments where appropriate

Image by yogesh more from Pixabay 

Pathways to the Future for US Big Two?

Open Doors Fall 2021 snapshot offered some solace for international student recruiters in the US after the strong headwinds of recent years.  It comes after nearly two years of pandemic that has seen a focus on technology enabled learning options, increased online language testing and a brutal culling of pathway relationships during 2019 and 2020.  A deeper dive into the numbers suggests that fundamentals are changing in ways that will have a material impact on the future of the private pathway providers.

Global demographics indicate that future growth will be driven by India and south-east Asia with a Mitchell Institute report indicating that “India has now overtaken China as the largest source country of international students.”  The majority of Open Doors respondents are now prioritizing recruitment in India – 56% in 2021 compared to 45% in 2019 – compared to China where the percentage is now 51% compared to 58% two years ago.  However, an increasing numbers of international students seeking graduate level study and having reasonable proficiency in English will brings challenges for pathways in their existing format.  

If Chinese students become less willing to travel due to caution over health, political factors and declining returns on investment in a western degree the problems will be compounded.  INTO’s own research from November 2021 notes that agents from China, Hong Kong and Macau think that the US has handled the COVID-19 vaccine roll-out considerably worse than the UK or Australia.  The rankings for the US being “welcoming and safe” are even less helpful.

Source: Agent Perspective on International Education in the Context of COVID-19, INTO University Partnerships, November 2021

The two established pathway operators with most at stake in the US are Shorelight and INTO but recent developments suggest differences in their willingness and ability to innovate, adjust strategy and move decisively.  It has been eight years since Shorelight burst onto the scene with a model that looked like an enhanced version of INTO’s pathway operation but VP Imran Oomer’s early claim that “we wanted to come in without a formula” was an indication of being willing to adapt. Shorelight now has at least 17 pathway partnerships while INTO has lost Marshall University, Washington State University and Colorado State University in the past three years to reduce it to a portfolio of nine US partners.

Past success is not always an indicator of future prosperity but a brief review of the two companies suggests how they might fare under current circumstances. The context and references are in the public domain and offer some grounds for speculation about possible directions of travel.                     

Shorelight

Shorelight announced five new partners towards the end of 2021 – Eureka College (Illinois), Austin College (Texas), St Thomas Aquinas (New York), Southwestern College (Texas) and Wilson College (Pennsylvania).  It seems a significant shift of emphasis for a business which had previously focused almost entirely on partnerships with US News and World Report nationally ranked institutions.   The announcements say that they are “accepting international undergraduate student applications through Shorelight” which indicates these are not the full pathway model. 

It’s always been difficult to see inside Shorelight’s finances and performance but there have been several indicators that enrollment aspirations for some partnerships have fallen short of expectations.  Huron Consulting Group Inc’s third quarter filing in November 2021 show that the ‘fair value’ of the convertible debt investment in Shorelight was reduced from $64.4m (December 2020) to $61.5m.  The total cost basis over three tranches (2014, 2015 and 2020) was $40.9m with a consolidated maturity date of January 2024.

In November 2021, CIBC Innovation Banking announced new debt financing for Shorelight although the amount was undisclosed.  The announcement says that the money will be used to “invest in automated, self-service tools for students, counselors and universities engaged on its platform” which may be a glimpse of the future of the Shorelight business. This echoes the language of the recruitment aggregators who have been able to secure significant investor funding in recent years. 

The latest surge in partners may be designed to impress potential new investors.  US recruitment conditions have eased and a robust pitch highlighting online delivery, long-term contractual partnerships with well-known brands and a burgeoning new stream of direct recruitment partners could be attractive.  Memories of the past few years of international enrollment declines are fading but with the mid-term elections in 2022 and a Presidential election now just three years away it could be a small window of opportunity.

More intriguingly, Shorelight may be in a position where a capacity for online delivery, the option of face-to-face study and a technology-led recruitment capability has made it into a credible prototype one-stop shop for student needs.  A decent number of strong brand names, a deepening pool of price points and a widening range of institutional types makes the portfolio big enough to provide a credible breadth of choice.  With reasonable post-study work options in the US, a more benign visa regime and evidence of demand from high-growth source countries there could be some attraction to playing the longer game.      

INTO

INTO’s performance has been reasonably well recorded over the past few years and the new year sees the six-month anniversary of CEO Olivia Streatfield’s tenure.  The recent departure of the company’s Chief Recruitment Officer offers scope for a revitalization of a top team that has been virtually unchanged for over five years.  Cumulative losses of partners in both the US and UK may have undermined the company’s ability to capitalize on blossoming UK enrollment and the resurgence of the US.

Over a five-year period, where it has lost six face-to-face pathways while major competitors have been growing their portfolios, INTO’s competitive edge has looked increasingly blunted.  Linking with Cialfo arguably handed ownership of a key recruitment channel to a third party after the 2020 annual report had trumpeted the acquisition of Schoolapply AG as “part of its strategy to continue develop (sic) its technology platform to maximise student recruitment…”.  Schoolapply was closed down in February 2021, just nine months after the purchase.     

There are few signs of INTO responding effectively to the opportunities arising from online learning. By contrast Study Group has Insendi, CEG Digital has seven online university partners, Shorelight has Shorelight Live and American Collegiate Live, and Kaplan is working with Purdue and has online UK partners.  Even relative newcomer Oxford International Education Group, which is opening its first US operation in 2022, has established a “Digital Institute”. 

INTO’s most recent partnership in the US is the direct recruitment relationship with University of Arizona (UoA) which reflects the recent direction of partnerships announced by Shorelight and Study Group.  It is not a competitive differentiator but may be a wise first step away from the pathway model at a point when enrollments at Oregon State University offer an insight into the problems as international student mobility trends shift.  Declining enrollments at the INTO OSU pathway operation are driven by a significant decline in students from China but there is no evidence that enrollments from India are increasing to pick up the slack. 

Source: Oregon State University, Institutional Research Enrollment and Demographic Reports

The past year has also seen INTO announce its first partnership in Australia which provides an even more complex set of options for its sales team to manage.  Diversity can be an attractive feature but often comes at the expense of spreading management talent too thinly and confusing the market. By contrast Shorelight has retained a laser focus on working with US institutions while diversifying the ways in which it can serve the needs of agents and students.          

INTO’s UK and US portfolio could support a level of organic growth as student mobility increases but a trade purchaser looking to beef up existing operations in the UK, US and Australia may be better able to optimize the assets.  With money still cheap and a lot of dry powder around it would not be too difficult to see one of the major global players, with relevant management chops and sales expertise, trying to find some synergies.  It would also be interesting to see if the management team has enough confidence in its skill and ability to invest in itself, buy out the Leeds Equity stake and compete aggressively in the new world.

It is appropriate to reflect that demand for US higher education remains strong throughout south Asia and that record numbers of study visas were approved for students from India. For operators that can meet that demand with a mixed US portfolio offering realistic options while also catering to the students considering online options as part of their planning process the future could be bright. While reflections on the future of the current big two pathways operators are speculative there is no doubt it will need an agile, flexible and committed approach to make the most of the changed circumstances.

  

INTO AT WORK IN A LAND DOWN UNDER*

Rumours of INTO University Partnerships (INTO) striking a deal with the University of Western Australia (UWA) seem to be gathering pace**.  It’s certainly clear that Study Group’s operation aligned with UWA, Taylor’s College, is closing in December 2021 and is currently not accepting any more students.  Meanwhile UWA has announced the opening of UWA College, a new pathway institution, in February 2022 and it sounds as if this could be where INTO has landed its first ‘partnership’ in Australia.

The loss of UWA takes Study Group down to three university partners in Australia, according to its website, but it continues with its links to the top-ranked Australian National University and University of Sydney.  Navitas currently lists 11 Australian partners with only one from the Go8.  Just for the record that’s Adelaide which also appears on Kaplan’s list of three partners. 

INTO’s entry into the Australian fray makes it the newcomer and comes some years after casting eyes at the opportunities .  Discussions with La Trobe (currently a Navitas partner) were fairly advanced in the early 2010’s and there were other flirtations.  The questions – why now and why Perth – would lead to an understanding of whether this is opportunism, an emerging strategy for diversification or a desperate throw of the dice.

The company’s problems with losing partners have been well rehearsed in recent months but there seemed some logic to taking joint ventures accruing debts to INTO out of the portfolio.  While it is doubtful that all the decisions to close were driven by INTO, the remaining partners include some top names in the UK at a point when international recruitment is bouncing back.  Almost every pathway group has had to take some pain with closures in the US so INTO’s troubles there were not uncommon.

It still seems something of a leap to take on a new partner in a country where the company has no infrastructure and limited operational experience.  Even more so at a point when that country has a very uncertain path to being able to welcome international students back in the numbers it once enjoyed.  It’s also reasonable to say that Perth has not historically been the epicentre for international student growth in Australia and that enrollment has lagged behind the country’s impressive upward curve to 2019.

Sources: UWA Annual Report (showing student load) and Australian Department of Education Skills and Employment

While UWA is one of the Group of 8 of top universities in Australia but is also behind some of the more illustrious names in terms of global ranking and attractiveness to international students.  So, even when the borders reopen there is little to suggest that UWA will be at the front of mind for international students looking to find a top ranked university.   All the while, there is also the drumbeat of Australian politicians and pundits who are keen to see the 2020 reduction in international student numbers go down even further to reduce university dependence on international fees. 

 THE 2021 Global RankQS Global Rankings 2022% of international students (THE measure)
University of Melbourne313748
University of Sydney513843
Australian National University592747
University of Queensland624738
Monash University645843
UNSW Sydney674344
University of Adelaide11810829
University of Western Australia1399329
Uni of Technology Sydney16013336
University of Canberra18443636

Business Insider Australia and other publications have set out the broader risks to Australia’s booming international student market as its Government struggles to find ways to allow inward mobility.  UWA has taken the opportunity to roll out $40m in ‘structural cost cuts’, including ‘university-wide redundancies’ while flagging heavy investment in its campus.  All of this plays out against the background of continuing tensions between the governments of Australia and China with the latest spat over the Great Barrier Reef and complaints at the World Trade Organisation being just the latest examples.

It is fair to say that the jury is out on how soon and how robustly Australia will return to the international student recruitment party.  Those who have travelled the scene for many years know better than to write them off and they have overcome dips in enrollments before.  But the resurgence of the UK, the Biden bounce and Canada’s continuing surge means that the competitive market they face will be more challenging than ever before.

All in all the link up, if it is confirmed, seems out of context for a business that has focused so heavily on the US for the past five years.  The geopolitics of the enrollment potential are also difficult to divine at this stage and may make the partnership a harder sell.  It’s going to be interesting to watch and see if INTO find it the “land of plenty” or whether those making the decision will think they’d “better run…better take cover.”*

NOTES

* It’s sometimes irresistible to allude to the mighty Men At Work and their song Down Under which topped charts around the world between 1981 and 1983.  In September 1983 it was adopted as the theme song by the crew of Australia II in their successful challenge for the America’s Cup yacht trophy.

** As always, I would welcome any clarification or correction from an authoritative source at the University of Western Australia or INTO University Partnerships and amend the copy accordingly. 

Image by Katrina_S from Pixabay

INTO THE GREAT WIDE OPEN*

It’s always difficult to know when news is official and when it’s a false start and a case in point is the appearance then disappearance of a new Chief Executive Officer for INTO University Partnerships (INTO) over the course of a few days last week.  It would be invidious to name names publicly at this point but one day the INTO corporate website had a picture and biography then a day later it was gone.  It all happened so quickly that I was pleased to have a conversation with a colleague who had seen the website and could also name the individual.

There doesn’t appear to have been a press announcement about the appointment, but on Wednesday 16 June, the site also had INTO’s co-founder John Sykes listed as Deputy Chief Executive and VP of UK Operations so there seemed to be a nascent structure in place.  More curious is that all of INTO’s pages related to people – and they were extensive – went missing and remain so on Wednesday 23 June.  If you click on the link to Our People it takes you to a bland page about Global Reach – Global Impact, the Leadership Team area on Corporate Information is a desert and the Meet Our North American Development Team section is as blank as untrodden snow.

Any official and authoritative explanation is welcome and I’m happy to provide an update if it is forthcoming.  Perhaps the wider site needed a major refreshing but if so it would be reasonable to see the Marshall Student Center and Colorado State University imagery coming down because those joint ventures have closed.  Anyone who has had responsibility for keeping websites up to date know that it is not for the faint-hearted and requires constant vigilance.  Using collateral from partnerships that have ended feels a little like the corporate equivalent of carrying a torch for a childhood sweetheart. 

The claim of 30 university partnerships in the UK and US also does not square with the logos of nine US partners and nine UK partners.  The relationship with Chinese universities appears to have disappeared from the corporate site but the INTO student site still has opportunities for study at Nankai University.  It’s all pretty confusing.

Only time will tell if the lack of information about leadership reflects a new approach to privacy, a major update or a pending restructure of significant proportions but it’s a good moment to review the task facing a new CEO if or when they are appointed.  Partnership growth has stalled, online capability appears to be behind the curve and the main competition has forged ahead in both areas.  It seems a long way from the growth proposition that encouraged Leeds Equity Partners to invest £66m ($105.8m) for a 25% stake in the business back in 2013.    

Over the past two years INTO has seen the end of joint ventures at the University of Gloucestershire, Newcastle University London and Glasgow Caledonian University in the UK as well as Marshall University, Colorado State University and Washington State University in the USA.  The company invested in School Apply in early 2020 and closed it a year or so later.

The INTO Annual Report for the year ended 31 July 2020 was for a year before the full impact of the pandemic was felt on 2020/21 enrolments and suggested little growth.  Adjusted turnover (which removes discontinued operations) was up 3% to £202k while adjusted EBITDA fell 9.1% to £26m.  Overall, the intercompany debt from joint ventures to INTO had increased by around £8m to £44m with the Centre’s closing listed as debtors to the tune of around £11m.

After entering the pathway market with a ground-breaking joint-venture model at the University of East Anglia in 2006, INTO leveraged its model with great initial success in the US at Oregon State University from 2008.  There have been no new partners in the UK since the University of Stirling in 2014 and the most recent pathway additions in the US was Hofstra University announced in January 2019.  Shorelight adopted many aspects of the INTO model and has forged ahead to be the dominant partner of American universities since its founding in 2013.  Long-term players like Kaplan, CEG, Navitas and Study Group and upstarts like QA Higher Education and Oxford International have scooped up the most recent UK university pathway partnerships.

INTO’s purchase of SchoolApply may have been the start of a foray into the world of online delivery but it is no longer active and there is little evidence of significant advances in this area.  This is at a point where Study Group is moving forward with Insendi, Kaplan Open Learning has online partnerships with Essex and Liverpool, CEG Digital has an established stable of partners and even Oxford International has been making waves with its Digital Institute.  In the US, Shorelight has made a great deal of its delivery through the Shorelight Live platform and appears to be repositioning as a business delivering technological solutions to student problems.

One way of looking at things might be to suggest that the reduction in partnerships has been a deliberate step by INTO to clean up some joint ventures that had struggled to make headway in a competitive market.  The growing level of indebtedness from these joint ventures to INTO might suggest that they were not making adequate progress but it does seem as if several decisions were university driven.  The latest closures are part of history that includes the closures of partnerships with St George’s, University of London, and UEA London which undermines the original notion of long-term joint ventures providing greater stability than third-party pathway providers.

It’s something of a strategic head-scratcher and the loss of academic ‘supply’ comes at a tipping point where both the US and UK are demonstrably back in the game as far as international student demand is concerned.  The lack of a viable online option seems to put INTO at a disadvantage in delivering to a market where increased flexibility and option has become the norm and is likely to grow in future years.

Perhaps there is a mega-deal on its way and one might guess that Leeds Equity Partner would be pleased to find a way to realise some return after eight years of a holding position.  A possible merger with Shorelight to become a demonstrable lead player in the US seems a long shot but the operating models have some similarities and the online expertise may bring energy to INTO’s portfolio.  Or maybe this is the moment where a stable group generating solid if unspectacular EBITDA could be taken back into 100% ownership by INTO’s founder, Andrew Colin.

It’s all speculation but for an outside observer INTO needs to establish some renewed momentum if it is to fulfil the promise of its early days of innovation, creativity and energy.  There’s been substantial investment in talent at the top level and perhaps a new CEO is the final piece in the jigsaw.  Only time will tell.

Image by Anemone123 from Pixabay 

* Fans of the mighty Tom Petty will know that Into The Great Wide Open is co-written with Jeff Lynne and charts the progress of Eddie as he “went to Hollywood, got a tattoo”, “made a record and it went in the charts” to the time “their A&R man said, ‘I don’t hear a single”.  It’s the old story of “rebel without a clue”, to overnight success, to uncertainty when “the future was wide open”.      

Amendment on 1 May 2023: The earlier version of this blog suggested that Andrew Colin, founder of INTO, might take the business “private”. It has been amended to clarify that this was intended to suggest he might choose to take it 100% back into his sole ownership