Tag: international students

UK International Enrolments Unchained

The latest HESA figures (released 31 January 2023) give a further instalment and insight on the extraordinary recent changes in global student mobility and the impact on UK universities.  As predicted in early 2020 the growth of India as a market, largely encouraged by a more welcoming post-study work situation, has substantially altered the landscape.  This blog takes a look at other significant changes, a snapshot of key countries and who the winners and losers are in the enrollment stakes. The focus is on full-time students1 and there are a few words of caution at the end.

Overview    

After a few relatively flat years the period from 2018/19 to 2021/22 has seen a CAGR of 17.39% in enrolment of full-time, non-EU international students. Part-time, non-EU international students have grown by a CAGR of 10.44% from a much lower base. While part-time changes are interesting the focus here remains on full-time numbers.

The first and most obvious thing about the mix of students is that Postgraduate Taught numbers have accelerated rapidly and particularly so from 2020/21 to 2021/22.  The total number of postgraduates is up 117% over the period with the total number of undergraduates up 26%.  A strong performance but always with the risk that postgraduates usually only come for a single year and as global competition increases may look elsewhere.

It is no surprise to anyone to see that India has been the dominant driver of the change.  But both “Other Asia” and “Nigeria” enrolments have increased by more than China since 2018/19. 

  NB: This chart has not been disaggregated for Full and Part-time.  Increases in part-time students are relatively modest over the period.

“Other Asia” is worth disaggregating and the chart below shows the change in enrolments over the past four years in the countries with the highest number of students in the UK.  Most noticeable in volume terms is the year-on-year growth from Bangladesh and Pakistan.  68% of full-time students from Bangladesh and 67% from Pakistan are postgraduate taught compared to 80% of those from both India and Nigeria. By contrast 52.6% of full-time Chinese students and just 17% of Hong Kong students are postgraduate taught. 

 Country By Country Review

The countries to follow for volume growth are clearly India, Nigeria, Pakistan and Bangladesh and at each individual country level the march of the non-Russell Group universities goes on. This section focuses on the year-on-year growth from selected countries.

India

Coventry added 2,900 full time enrolments from India year-on-year and now stands only behind the University of Hertfordshire in terms of the largest Indian contingent in the UK.   Nearly half the year-on-year total increase from India for the UK came in the ten universities with the most significant change in enrolments.

There are also some interesting shifts within universities in terms of their balance of students.   As shown in the table below, the universities of Leicester and Brunel are in the top ten for increases in students from India (but are among the biggest losers from China).  Roehampton University’s year on year growth of 332.9% is quite startling.   The Russell Group universities have not been totally out of the picture with Glasgow, Manchester and Warwick all managing to add 1,000 or more Indian students year on year.

There may also be a word of warning due for institutions growing their numbers from India and relying on the increased volume being sustainable.  Five universities lost over 20% of their Indian enrolments year-on-year in 2021/22.  The University of Wolverhampton may offer a salutary tale with a rollercoaster ride from 85 in 2018/19 to 1360 in 2020/21 but a decline in 2021/22 to below its level of 840 in 2019/20. Any failure to offset that from other countries could be a serious financial hit.

Nigeria

The table for Nigeria shows the top six gainers to include the University of Hull’s extraordinary increase of 1207%, while of the 915 there are 870 postgraduate taught. The University of Hertfordshire has the largest number of Nigerian student enrolments in the UK and of the total 1,915 (83.8%) are postgraduate taught.  The best Russell Group performance was the University of Glasgow which increased by 60 students to 170.

Pakistan

The growth in enrolments from Pakistan is generally more widely spread, although non-Russell Group universities dominated recruitment from the market.  Queen Mary University of London was the best performing Russell Group university with an increase of 30 year-on-year.  The University of Hertfordshire performance puts it in the top five in terms of volume growth for each of Nigeria, Pakistan and Bangladesh and in the top ten for India.  If there were an overall league table they would probably lead on points.

Bangladesh

The University of Hertfordshire also features strongly in Bangladesh where it’s year on year growth put it in the top five.  Further down the rankings there are some significant percentage increases but from lower bases with De Montfort, for example, increasing from 50 to 390 and Cardiff Metropolitan going from 30 to 325.  Queen Mary University of London is the best placed Russell Group university with, um, 80.

China

The exception to the general rule continues to be China where the two Russell Group universities in Scotland are showing substantial growth.  University of the Arts is possibly the surprise packet in the top five for growth and other notable growth in a field dominated by the Russell Group institutions was shown by Goldsmiths College (470) and Kingston University (515).

As noted in previous blogs, however, the strong recruitment performance in China is not universal for the Russell Group.  The universities with the greatest year on year reduction in Chinese students are Liverpool and Newcastle with Queen’s University Belfast and Cardiff doing well below par for the sector.  In the context of their performance in India (as discussed above) it would be interesting to know if the universities of Leicester and Brunel have changed strategy because of opportunity or an inability to compete with brand sensitive students from China.

Summary and Thoughts

Taken in conjunction with previously reported trends in enrolment from 2018/19 to 2021/22 it is clear that the changes in growth markets have presented significant enrolment and financial opportunities for universities who may have struggled to recruit heavily in China.  There seems little doubt that while there is a benevolent, post-study work visa regime, universities in the UK will be able to continue making progress in India, Bangladesh, Pakistan and Nigeria.  Whether Russell Group institutions sharpen up their strategies or choose to wait (possibly hope) for a return of Chinese students remains to be seen.

What is also in the mix is whether the enrolment trend is driven solely by successful institutions offering some mix of low cost (both tuition and accommodation), sympathetic local culture, lower entry criteria and dynamic recruitment tactics.  The disparity in volume growth between Russell Group institutions and many well ranked universities such as Surrey, Loughborough, Bath and Lancaster seems extreme.  Perhaps some institutions need to look harder at their international office strategies. 

It is noticeable that of the top 40 universities in the 2023 Complete University Guide only the University of Leicester (29th) makes an impression among the best recruiters from India.  This may be another sign that students are largely ignoring rankings and pursuing a degree in a country where they will have the option to work during and after study.  These are features that are more about Government policy than university excellence.

There are, of course, other implications for the scale of growth being seen.  It is noticeable that the University of Bradford has closed applications to some courses for 2023 and that Oxford Brookes and the University of Salford have also made adjustments to constrain the number of applications being received from certain countries.  It is almost certain that other universities will be doing the same.

Beyond that are the financial implications. The University of Hertfordshire is in the top five gainers for the four biggest growth markets and this is reflected in the percentage of income arising from international tuition fees. From just 11.6% of total income in 2018/19 the fees are now worth 31.9% of total income.

One must also consider how those with sudden increases, like the University of Hull with an increase of 1207% in its students from Nigeria, will manage the student experience.  In 2020/21 Nigerian students made up 3.8% of the university’s full time international population but in 2021/22 they will be 30.2% of the group.  These are substantial shifts that require careful attention to maintain reputation and quality of academic performance.

Finally, there is the likelihood that growth will have continued into 2022 enrolments.  With the majority of students now coming as postgraduates for one year and an increasing propensity to intend to stay after studying, the summer of 2023 is likely to see greater competition for graduate jobs than ever before.  Whether the UK is ready to manage that opportunity successfully in the middle of a recession and with a Conservative Government planning its strategy for an election just 18 months away remains to be seen.

NOTES

  1. The focus is on full-time students to avoid any distortion from individual universities doing significantly better with part-time students.

Image by Jan Alexander from Pixabay 

PATHWAYS GREAT CONSOLIDATION?

Last week’s news that Oxford International Education Group (OIEG) is in the hunt for buying Cambridge Education Group (CEG) could be the first step in consolidation for the pathway sector.  It comes after a few torrid years where aspirations for pathway growth in the US foundered and the pandemic wreaked havoc with global student mobility.  Murmurs that QA Higher Education may also be on the block and long-standing speculation that Andrew Colin and/or Leeds Equity might seek options on their investment in INTO make for a potential realignment of interests.

On the face of it a trade sale for CEG has the advantage of reducing recruiter competition in a market where new entrants have been one factor in the growing cost of student acquisition.  It would also make for a group that had some genuine clout with fifteen UK pathway partners1 including a Russell Group name in the University of Southampton.  Both have minor interests in the US and CEG bring European partners and a burgeoning digital business with ten partners listed.

In the UK2 this would make it larger than Navitas (11), Kaplan (11) and INTO (6) and the same size as Study Group (who lost Coventry London in 2022 and where rumours suggest another possible defection in the north of England).  It’s a point where you could see one of those players having a look at QA Higher Education who have seven university partners including four where they offer a pathway but six where they deliver an undergraduate degree programme in partnership with a university.  The restructuring could even extend into consolidation of pathway operators with the aggregator and OPM markets.   

From Strength or Weakness?  

A recent comment on mergers and acquisitions suggested that “you can’t keep a good capitalist down and eventually greed will overcome fear.”  Many investors have cash in hand after a year with little action and there are suggestions CEG is available for between £150m and £200m.  The financial returns of the various elements of CEG and OIEG are not easy to divine from published information but one can either read or deduce a number of things:

Cambridge Education Group

The financials below come from the accounts of Camelot Topco, ultimate parent company of CEG3, for the year ended 31 August 2021.

ONCAMPUS revenue declined in 2021 to £39.6m due to the pandemic but was £54.4m in 2020.  CEG Digital revenue increased to £12.1m in 2021 from £6.2m in 2020 (one would presume partly due to pandemic related online measures).  Underlying EBITDA was £7.8m in 2020 but fell back to £3.2m in 2020 due to the pandemic.  Across the two business there were around 4,000 students enrolled.

Oxford International Education Group

The financials below come from the accounts of Sparrowhawk 2 Limited, the holding company of OIEG4, for the year ended 31 August 2022.  The comparative year on year numbers span the acquisition of the business in early 2021.

Overall turnover increased to £58.8m from £33.4m the previous year.  This includes pathways, a separate English language business, operations in north America, IELTS testing and two businesses in India.  It is possible to deduce that at least £14.5m of the £58.8m is not pathway related but the accounts state that pathway revenue had increased £11m year on year.  The numbers indicate that the business made a small operating loss on the year (£0.9m) but it is stated that this masks an “underlying profit of £2,907k”.  The business is forecast to “generate positive EBITDA” during the financial year to August 2023.  

Without having CEG’s accounts for 2022 it is not possible to know what a comparative performance to August 2022 was but one would anticipate a rebound in pathway business aided by the addition of new partners.  The business is also able to trumpet the addition of Loughborough University, who have been talking with potential pathway operators since at least 2007, as a partner in December 2022.  All in all, it looks as if OIEG would be taking on a larger business with some substantial and complementary assets.   

Caveat Emptor        

CEG is able to tell a strong story on digital developments and a growing portfolio of well ranked partners which might make it a very attractive proposition.  OIEG is an aspirational business which can point to partners that have done very well out of the growth in UK student recruitment with the University of Greenwich being one of the most significant beneficiaries of the growth in the Indian market.  So, what could possibly go wrong…

Anyone looking at the UK government’s turbulent approach to international student recruitment would point to the continuing possibility of changes to visa policy as a Conservative Government prepares the ground for an election in no more than 24 months.  Significant limitations on student family members (other than with PhD students) and constraints on post study work are two of the main ghosts at the feast.  More severe limitations on lower-ranked universities and “poor quality courses” would be particularly damaging to both CEG and OIEG portfolios.

Alongside that is the sense that CEG might see a window of opportunity that means a race to the exit is the most sensible option in a market where several factors could compromise future performance.  Examples include the evident resurgence of Australia as a competitor after several years of weakness, as well as the reality that Canada remains strong and the US seems to be concentrating on visa turnaround times in major growth markets.  All that is before the revitalisation of China as an international student recruiter with eyes on Africa and India, which seems an inevitable consequence of its borders reopening after COVID.

Those who have been involved in mergers and acquisitions will also recognise the substantial risks involved in trying to merge business cultures, operational activities and brands.  For pathway operators, even as they become increasingly involved in direct recruitment, there is the added challenge of a sales team trying to cope with a plethora of university brands in their bag and not doing justice to any of them.  Smart universities will also have the potential for amendments to contracts if ownership changes and could choose to negotiate hard on revised targets and penalties for failure.

What seems likely is that consolidation will come sooner rather than later as some operators and investors head for the exit doors while the UK environment looks acceptable. The possibility of aggregators, online delivery and post study employment options coming into the mix are likely to make for an interesting year. Interesting times.

NOTES

  1. This count includes seven OIEG partners and the eight listed in CEG’s ONCAMPUS brand.
  2. This is likely to be contested territory but I have attempted to review those relationships which are on campus, joint ventures, and have a pathway element. Authoritative corrections are welcome.
  3. The ultimate controlling partner is Bridgepoint Euro IV Fund managed by Bridgepoint Advisers Ltd.  The interest was purchased in April 2013 for a reported £185m.  In July 2019 reports indicated that Bridgepoint had sold the CATS Colleges division of CEG to Bright Scholar for a transaction value of £150m.
  4. The ultimate controlling party is THI Holdings GmbH which acquired a majority stake in March 2021 in a deal which saw OIEG’s schools division sold to Nord Anglia Education.    

Image by Pete Linforth from Pixabay 

Reelin’ In the Years

Following yesterday’s blog it was helpful to see the HESA summary data for 2021/22 enrollments appearing.  While this does not give a detailed analysis of recruitment by source country for each institution it provides the data to demonstrate that a number of non-Russell Group universities have been outperforming their, supposedly, illustrious competitors in international student recruitment for the past two years of published figures.  The outperformance is on both a percentage growth and an absolute volume growth.

It seems a reasonable bet that this growth will have been driven by students from India and other countries where the importance of post-study work and lower costs of studying are major attractions.  Lean and well managed universities that are used to scrapping for every student and every penny but do not carry expensive infrastructure costs, top ranked (and paid) professors, or any illusions about rankings being a measure of attractiveness are probably doing very well.        

What’s Another Year1

HESA data shows that the year 2021/22 saw the universities of Greenwich, Teeside and Hertfordshire top this list of 19 institutions for percentage growth in international enrollments year on year.  The universities of Liverpool and Newcastle saw a decline in their enrollments.  Given the success of Northumbria University (situated less than a mile from Newcastle University) and Teesside University it seems misguided to suggest, as the Times Higher Education has, that geography is a significant factor in this recruitment performance.

Note:  Source HESA (non-Russell Group shown in red)

Golden Years2

Looking over a longer time span it can be seen that the difference in performance is even more stark.  Over a two year period the universities of Ulster, Teesside, Greenwich and Hertfordshire have more than doubled their enrollment of international students.  The Russell Group’s University of Southampton performance over this two year period less exciting than its year on year 2020/21 to 2021/22 growth but when HESA data at institution level becomes available it will be interesting to see whether their country recruitment strategy changed. 

Note:  Source HESA (non-Russell Group shown in red)

Percentages can, of course, be misleading and what matters most to tuition fee income is the absolute number of students paying fees – bums on seats in common parlance.  Several Russell Group universities started with significant international enrollments so might be expected to have increased their number of students more rapidly even if the percentage is lower.  However, even by this measure several non-Russell Group universities are outperforming the Russell Group institutions over the past two years.

Note:  Source HESA (non-Russell Group shown in red)

Tomorrow Never Knows3

It is commonly accepted that the often-quoted experiment, where a frog is placed in a pan of water that is slowly heated and is so insensitive to small changes in the external environment that it fails to escape before being boiled, is apocryphal.  The response of some universities to the changing environment suggests that the experiment might be taking place in real time with international student recruitment replacing the water.  Both the University of Liverpool and Newcastle University have done poorly over the past two years but both seem to be ignoring the underlying problem.

In its 2020/21 Financial Statements, the University of Liverpool accounts for its decline in international student fee tuition income by saying that, “overseas student recruitment continues to be affected by the pandemic, and although the impact is reduced in 2021/22, we have not yet seen a return in overseas demand to pre-pandemic levels.”  In and of itself the statement is true for Liverpool but clearly not so for many other universities.  Later in the Statements it is noted that, “there is a particular exposure to international relations with China due to our Joint Venture, XJTLU” which raises obvious questions about a recruitment strategy that has not embraced the growth in students from other markets.

Newcastle University’s Integrated Annual Report makes the point that “..we are heavily dependent on international students to keep the business running” but seems to be living in an alternative reality when it claims “..we have had a successful year with regard to international student recruitment.”  The University trumpets its league tables success for the year but fails to recognize that this is not what is driving the needs and expectations of students in the most rapidly growing markets.  The tired excuse that “ongoing uncertainty caused by the pandemic saw a lower than expected international undergraduate intake” suggests the university is the victim of an uncontrollable situation at a point when Northumbria University, just a stone’s throw away, has added nearly 3,000 international students in just two years.

On the same note, the University of Southampton’s Financial Statements suggest that “strong league table performance is a good indicator of future student recruitment, especially internationally,”. This is unsurprising for an institution that has formed its strategy around moving forward in the league tables but the facts showing desultory performance from well ranked institutions in the Russell Group club don’t exactly support the assertion. Recent research suggests that 72% of GenZ students think the rankings less important than finding a university that gives them the right skills for their future.

It is always good advice to separate cause from correlation and to not be the apocryphal frog. A new twist on an old phrase might be that it is time these universities smelt the coffee and woke up.  There is a new international recruitment dynamic and they need to pay attention. 

Notes:

The headline is from the Steely Dan classic, Reelin’ In The Years, released in 1972, although my argument is that some Russell Group universities are reeling in terms of response to market changes than fishing effectively. For those interested in such things, the Wikipedia article on the band appears to avoid exploring the origin of the band’s name.

  1. What’s Another Year is the Irish Eurovision song contest winner from 1980 when it was sung by Johnny Logan. Johnny Logan is the only performer to have won the Eurovision Song Contest twice, in 1980 and 1987. He also composed the winning song, Why Me?, in 1992.
  2. Golden Years is from David Bowie’s Station to Station album released in 1975.
  3. Tomorrow Never Knows is from The Beatles’ Revolver album released in 1966. The song title apparently inspired the title of the 1997 James Bond film Tomorrow Never Dies (which itself is supposed to be typo from the original idea “tomorrow never lies”. 

Sign o’ the Times

For a news outlet that claims to have a mission to be “..the definitive source of data, insight and expertise on higher education worldwide” the Times Higher Education sometimes seems woefully short on understanding of the realities of international student recruitment.  There is also an unhealthy focus on Russell Group universities which suggests more about the THE’s obsession with rankings, brands and research than any enlightened engagement with the broader sector.  A recent example is its article “Overseas student recruitment windfall for leading UK universities” (January 18, 2022).

For those outside the THE paywall, the piece concentrates on some Russell Group universities seeing international student fee income rising significantly between 2020-21 and 2021-22.  There is a suggestion that those in London and the south of England have done particularly well but that enrolments are “either flat or slightly down at some northern institutions, including…Liverpool, Newcastle and Sheffield.”  As well as perpetuating the myth that the Russell Group are either all or the only leading universities in the UK this misses a much more interesting story about the way that changing international markets are altering the financial and recruitment dynamics of the sector.

What If becomes the Hot Thing2

As far back as January 2020 my blog predicted that “..the incoming surge of Indian students might bring a new dynamic to the market” and that “the return of post-study work visas has disrupted enrolment patterns and some lower-ranked universities may have the most cause to be grateful.”  In March 2021 I presented data showing that, “..the distribution of Indian students by type of institution has proved to be significantly different to that of Chinese students” and gave an example as to why geographical location was not the driving factor.  Then in January 2022, I reinforced the findings and made the point that “price points and graduate outcomes could become far more powerful signals than whether the THE, QS and AWUR algorithms choose to favour the rich, old and elitist.”

The impact on increases in student fee income is very clear.  Year on year, percentage rises in international fees (excluding EU students) actually show that the Russell Group is underperforming many other universities.  It is equally clear that location is not the main driver of performance.

The table below shows the 2018/19 to 2020/21 change in international enrollments from China and India across 8 Russell Group universities and 8 non-Russell Group universities (including low tariff institutions).  This is shown alongside the year-on-year change in international fee income (excluding EU) from 2020-21 to 2021-22.  Several non-Russell Group institutions have seen greater comparative financial growth by increasing student enrollments from India while those in the Russell Group remain reliant on China.

Table – % Change in Year on Year International Fee income 2020/21 and Change in Volume of Chinese and Indian Enrollments from 2018/19 to 2020/21   

 % change in international (exc EU) fee income 2020-21 to 2021-22Change in number (and percentage) of Chinese students 2018/19-2020/21Change in number (and percentage) of Indian students 2018/19-2020/21
Southampton92.1745 (27.5%)50 (27.8%)
Teesside8545 (13.4%)1470 (358.5%)
Hertfordshire76.9-355 (-53.8%)3930 (397%)
Greenwich60.8-285 (-44.5%)1760 (239.5%)
Ulster55.8-85 (-47.2%)3270 (2725%)
Queen Mary47.4600 (40.8%)150 (29.4%)
Kingston44.3110 (24.2%)1635 (302.8%)
Exeter33695 (50.7%)135 (28.7%)
Northumbria29.250 (10.1%)2215 (357.3%)
Leicester26.7-590 (-36.1%)1025 (683.3%)
Central Lancashire22-315 (-44.4%)2365 (375.4%)
Warwick21730 (23.4%)80 (11.2%)
Imperial18.51115 (40.3%)35 (14.3%)
Manchester16.53000 (53.5%)85 (16.2%)
UCL164040 (64.7%)55 (13.6%)
Sheffield0.61550 (32%)545 (187.9%)
Liverpool-14.2-1300 (-23.4%)240 (200%)

Notes:

  1. Non-Russell Group institutions are in bold
  2. Financial information is taken from 2021-22 Financial Statements
  3. Student enrollment data is taken from HESA

Newcastle University is not shown because it does not appear to separate EU and other international student fee income in its financial statements.  However, the enrollment numbers comparison between it and the University of Northumbria (which is less than a mile away) demonstrates that blanket assertions about trouble up north are misguided.  Northumbria’s international enrollments have outpaced Newcastle’s significantly over the past three years with growth from India providing the bulk of the additional numbers.  It is notable that, according to HESA, Newcastle University had fewer Indian students in 2020/21 than in 2018/19.

Source: HESA (this data includes EU students.  In 2020/21 Newcastle had 1,360 and Northumbria 1,450 from the EU)

The substantial gaps in performance on recruitment of students from India does raise a number of tantalising questions about the international student strategy and/or capability of Russell Group universities.  Questions might include:

  • do they ignore academically qualified students from India;
  • do academically qualified students from India reject Russell Group institutions because of issues such as cost of tuition and accommodation;
  • are the number of academically qualified students from India so limited that Russell Group institutions struggle to grow numbers;
  • do Russell Group universities have some form of inherent bias against students from India.

Someone with a sharp eye to the sensibilities of the Home Secretary and the current political mood music might also wonder if the propensity of lower ranked, less costly and lower tariff universities to attract students from India will be seen as evidence that they are focused more on fee income than the “brightest and the best.”

Around the World in a Day3

The time lag in HESA figures means we will have to wait for some insights into whether Russell Group universities significantly changed their approach towards India in time for enrollments in 2021/22.  Without such a switch some would seem to be relying on a resurgence of students from China to maintain numbers and financial performance.  It seems likely, however, that their fee structure and overall costs might make it difficult to switch attention to price-conscious source markets.

While watching this space to see how things develop, one would hope that the THE starts to reflect that there is a world outside WC1, London, the south of England and the league tables.  For many students, issues like cost, employability, post study work and routes to immigration are at least as important in decision making as the SDGs, rankings and research capability.  With their fingers and a computer they can walk around the world in a day to assess their options and are capable of great flexibility in changing country, institution and course of study if it suits their needs.

Notes

Headline and sub-headings courtesy of the much-missed Prince.

  1. Sign o’ the Times was the title track of a studio double album released in 1987.  One of my guilty pleasures is the Starfish and Coffee track which Prince co-wrote with his then-girlfriend Susannah Melvoin.  Cynthia Rose is a real person and apparently what she really told her teacher she had in her lunch box was “starfish and pee pee”.
  2. What If is a cover version of a song written by Nichole Nordeman that appeared on her album Brave in 2005.  Prince recorded his version with 3rdEyeGirl in 2013.   Hot Thing appears on the Sign o’ the Times album and was recorded in 1986.
  3. Around the World In a Day was the title track from the seventh studio album from Prince which featured the memorable Raspberry Beret that provided the name for UK band the Lightning   Seeds through a misheard lyric.   Ian Broudie, who formed the band, thought the line “thunder drowns out what the lightning sees” was “thunder drowns out the lightning seeds.”

Image by Gerd Altmann from Pixabay 

A Civil Action

In the film A Civil Action, Jan Schlichtmann says, “The whole idea of lawsuits is to settle…”.1  There is no settlement yet but the court case between2 the University of South Florida (USF) and INTO University Partnerships (INTO) has been closed and further dispute resolution is planned.  USF has dropped the case with the claim it has achieved the outcome it was seeking from its initial action.   

Its Notice of Voluntary Dismissal3 on 3 January 2023 says that at the receivership hearing on 16 December 2022, the “evidence submitted by the parties proved Defendants, INTO USF LP and INTO USF, Inc., are taking the actions that the Financing Corporation’s declaratory judgment lawsuit sought (i.e., acknowledging the termination of the Stockholder agreement, gathering and protecting the Joint Venture assets, budgeting to fund the teach-out, and winding-up the joint venture).”  In the transcript of the hearing the judge, The Honorable Darren D. Farfante, made broadly the same points while declining USF’s motion to appoint a receiver4.

It seems likely that further discussions between the parties will be conducted in private but after two previous failures there remains the possibility that these will be unproductive.  Most importantly for some observers is that students, including a group arriving in Spring 2023, are being taught out.  The transcript also tells us that the joint venture board has hired Berger Singerman, “to provide the joint venture with advice regarding the operation of the business during a wind-down, to provide advice regarding corporate governance matters and fiduciary duties.”

Presuming that wind-down results in the eventual closure of the joint venture it will leave INTO with six pathway joint ventures in the US from the eleven that have been started since 2008.5   

Joint Venture PartnerOpened/AnnouncedJoint Venture Closed6
Oregon State University2008 
University of South Florida20092022
Colorado State University20122021
Marshall University20122020
Drew University2015 
George Mason University2014 
St Louis University20152021 (became 100% INTO owned
University of Alabama – Birmingham2015 
Washington State University20172022
Suffolk University2017 
Illinois State University2018 

Last Orders7

While the case regarding the teach out and wind down of the joint venture has closed the flurry of claims and counter-claims suggests there is still plenty to be resolved.  In this respect there are some helpful insights based on how the case might have developed according to a Joint Case Management Report filed on 6 December 20228.  The document summarizes the dispute and then goes on to outline key areas of activity ahead of being ready for a trial in February 2024 if the case had gone ahead.

The process includes witnesses to be deposed (up to 30 fact witnesses and four expert witnesses) and “an alternative dispute resolution” by the end of second quarter 2023.  Other key dates in 2023 include selecting a mediator by 1 April, deadline to identify experts by 7 July, and expert discovery closure by 6 October.  The expert testimony focused on the financial status of the joint venture, including its solvency, on 21 April 2022, and “alleged damages to the INTO parties.”

A recent article in Business Law Today made the point that the “median duration of a joint venture is ten years” and suggested that “all joint ventures end—so plan for it.”  The trajectory of traditional pathways in the US is uncertain and this may not be the last closure, so universities considering joint ventures as a way forward may want to pay close attention.  Another data point could be the reported settlement resolution with a total value of “around $6.4m” passed by Washington State University Board of Regents in July 2022 after the university’s relationship with INTO changed. 

NOTES

This blog recognizes the complexity of the case and is not intended to reflect any view on the merits of either plaintiffs or defendants.  References for filings are given in order that readers can seek further insight if they wish.  Any amendments on matters of fact are welcome from authoritative sources.   

  1. The film is based on a 1995 book which tells the story of a real court case about environmental   pollution in Massachusetts in the 1980s.
  2. The case in the Circuit Court of the Thirteenth Judicial Circuit in and for Hillsborough County, Florida Circuit Civil Division is formally between USF Financing Corporation (plaintiffs) and INTO USF LP and INTO USF, INC.  The Consolidated Lead Case is 22-CA-006001, Div. L.  Filing numbers below relate to this case.
  3. Filing # 163938884 E-Filed 01/03/2023
  4. Filing # 163938229 E-Filed 01/03/2023
  5. Hofstra University is omitted – there is no listing in the INTO University Partnership report and accounts indicating it is a joint venture.  All other entries in the grid are taken from publicly available information or observation of websites at the time of launch/closure.
  6. Closures are rarely the subject of public announcements.  Any authoritative amendments to these dates are welcome.  In several cases the relationship has changed to become a direct recruitment rather than joint venture pathway arrangement.
  7. Last Orders is a 1996 Booker Prize-winning novel by British writer Graham Swift.  Its title relates to the Last Will and Testament of Jack Dodds and the instructions therein, but also to “last   orders” the common call in the UK for final orders of drink before a public house closes.
  8. Filing # 162471158 E-Filed 12/06/2022

Image by Chris Sansbury from Pixabay 

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 

Open Doors or Closing Time for US Pathways?

Open Doors data for 2021/22 confirmed trends that have already become evident in the UK and are likely to shape the future of global student recruitment for several years.  It also points to some stark realities for pathway operators that may cast a shadow over any hopes for a post-pandemic recovery in the US.  Most starkly, the recovery was marked by the highest ever new postgraduate intake, largely driven by students from India, while new undergraduate enrollment was only just above 2011/12 levels.

Will China Bounce or Break or Will It Depend Where It’s Dropped?

One of the biggest questions facing pathway operators in the US is whether enrollment numbers from China have reached a low point and will rebound.  The overall number of degree students from China enrolled in 2021/22 was 232,674 which was 16.7% down on 2017.  Undergraduate enrollments were down 26.3%.

However, the impact is not the same across all states.  Consideration of the 25 states with more than 10,000 international students in 2017 shows four who increased the overall number of “Foreign Students in the State” – Arizona, Massachusetts, North Carolina and Maryland. The first two made significant percentage increases from India while the latter two also increased the percentage enrolled from China

By contrast the two states with the largest percentage loss in international students over the five years were Oregon (-42.4%) and Iowa (-34%).  Of the 25 states, they had the highest percentage of students from China and in the case of Oregon the second highest percentage was from Saudi Arabia rather than India in 2017.  The leading universities in each state – Oregon State University, Corvallis and Iowa State University – lost 26.7% and 30% of international students enrollment respectively.    

  *Information from Open Doors Fact Sheets 2017 and 2022.  Numbers relate to “foreign students in the state”. 

A thoughtfully argued piece in University World News has suggested that a variety of factors could see a significant rebound by Autumn 2025.  This is tempered by factors including the growing strength of other recruiting countries and the developing academic quality of Chinese universities.  Others have suggested that unpredictable geopolitics, the potential for online delivery and universities desire for diversity may be major factors suppressing demand from China. 

Either way it seems an unpredictable future and not something to bet the house on.  Certainly, US universities wanting to rebuild their numbers are going to have to think long and hard about products, price points, promotion and graduate employability.  It seems possible that as global alternatives increase, recruitment markets change and in-country competition stiffens the role of pathways will come under further scrutiny.    

Pathways Poser

Responses by the main pathway operators to changing market dynamics have differed.  A previous blog illustrated Shorelight’s pivot from pathways to direct recruitment options but there has been little sign of such significant movement from its main US competitor, INTO University Partnerships (IUP).  The situation in Oregon, home to key IUP partner Oregon State University (OSU), suggests that the need for action may be growing.   

OSU provides long term, consistent enrollment reporting though its Office of Institutional Research which gives some weight to this thinking.  Despite the 2021/22 growth reported in the Open Doors data, OSU did not show international postgraduate growth in Fall 2021.  Fall 2022 numbers show another overall decline in international enrollments driven by falling undergraduate numbers and only limited growth in postgraduates.   

*These figures include all INTO Oregon State University (INTO OSU) pathway enrollments except Academic English

The impact of declining numbers from China is evident.  Despite recruitment support for direct admits from pathway partners IUP there seems to be limited ability to accelerate enrollment of students from other markets to compensate.  While the number of students coming from India to enrol is showing reasonable growth it is starting from a low base. 

Overall enrollment has been impacted by a continuing decline in the INTO OSU pathway operation.  Undergraduate pathway enrollments in Fall 2022 were down 80% over five years (and 65% on 2019), while graduate pathway enrollments were down 57% over five years (and 62% since 2019).  Total enrollments for INTO OSU have fallen 72% since 2017.

A previous review of Fall 2022 preliminary numbers from INTO George Mason University showed that IUP’s pathway operation at that university was struggling to bounce back after the pandemic but there was no information available concerning countries of origin.  INTO OSU data offers country insights and shows that three of the four main countries of origin have seen declines, with China falling from 581 students to 48 over 5 years (92%).  Numbers from India have shown small fluctuations but in Fall 2022 the intake of 16 was the same as in 2017.

Money Matters

Alongside declining volumes the INTO OSU debt to IUP increases.  This is, presumably, all well and good if the joint venture can generate enough pathway enrollments or find alternative revenue streams to pay the debt back over time.  However, three of IUP’s US joint ventures have closed in recent years – at Colorado State University, Marshall University and Washington State University – with a fourth, at St Louis University now wholly owned. 

The joint venture at the University of South Florida is not currently recruiting and is under threat.   Recent court filings have shown that USF Financing Corporation (USFFC) sought a “declaratory judgment that the 2010 stockholders Agreement between USF FC, the Company, and the INTO Defendants is terminated as of April 21, 2022.” The grounds were that the joint venture is “insolvent under both a balance sheet basis and inability to pay debts as they become due, and (b) has demonstrated a material adverse financial position where it could not perform all or a substantial part of its obligations..”.

*Taken from IUP annual reports up to and including that for the year ended 31 July 2021.  Excludes INTO SLU which is wholly owned, INTO USF which is not currently recruiting and INTO Hofstra which the INTO University Partnerships annual report does not record as a joint venture.

**The 2021 Financial Statements of Illinois State University (p.50) note that “INTO ISU has an agreement with its two partners, Global and INTO NA, which allows INTO ISU to borrow up to $6,000,000 in operating capital from INTO NA with an interest rate of 6%…. INTO ISU has outstanding borrowings with INTO NA in the amounts of $6,000,000 and accrued interest of $488,392 for the year ended June 30, 2021.”  INTO NA is a wholly owned subsidiary of INTO University Partnership Limited (IUP).

Reflections and Realities

Global pathway operators have many creative, flexible and commercially minded individuals but it’s worth remembering Margaret Thatcher’s dictum that “there is no way in which one can buck the market.”  Open Doors provides a picture of 2021/22 but as more universities report on their Fall 2022 enrollments it becomes even clearer that the dynamics have changed.  With all four major recruiting countries having relatively benign government policies it is no time to be clinging to outdated models with 2023 recruitment already starting.

Notes

As always the text reflects my understanding of the data. I am happy to receive any alternative thoughts or corrections from authoritative sources.

Image by Kingrise from Pixabay 

Let’s Do the Time Warp…Again*

Back in September 2021, pre-pandemic and five Tory Education ministers** ago, a blog shortly after the restoration of post-study work visas reflected how this might be a factor in the party’s continuing tensions around immigration .  Suella Braverman’s speech to the party conference this week highlighted that the issue still exists and suggest a fault line through which university hopes for international student recruitment could fall.  It is not surprising that vested interests in higher education, who have been licking their lips at enrollment growth, have responded so vigorously.

With a bit of a mind flip, You’re into the time slip

Among the first in line for the defence was ApplyBoard Advisory Board Chairman, Jo Johnson, who also leads the company’s UK Advisory Board and its worthies in helping build the company’s business in the UK.   He was interestingly narrow in his choice of words and vaunted the importance of international students “..if we want to be a science superpower.”  It’s an echo of the original announcement from Priti Patel, in September 2019, which said the new Graduate Route ‘will mean talented international students, whether in science and maths or technology and engineering, can study in the UK…’

The suspicious might think that this continues to lay the groundwork for a downgrading of the humanities or some form of quota system that favours the sciences above humanities when it comes to dishing out visas.  Almost inevitably that would play to the interests of the established hierarchy of universities with their lion’s share of science funding and students.  Those who don’t think these hierarchies have any place in Government policy, or that Ministers won’t allow league tables to distort thinking, would do well to remember that the High Potential Individual visa is currently restricted to graduates of 37 universities who have successfully navigated, manipulated or, for some, misrepresented their way into two of three nominated global rankings.

It’s just a jump to the left, And then a step to the right

Back in May 2022 when the High Potential Individual visa was launched, then Chancellor Rishi Sunak (remember him) was proud it helped “to create one of the world’s most attractive visa regimes for entrepreneurs and highly skilled people.”  This seems to have been a little too much of an open door for some and there are reports of the Home Office beginning a review of the number of dependants accompanying international students studying in the UK.  The numbers tell their own story with study visas up 71% from 2019 to 2022 while dependants have gone up over five times.

Perhaps helpfully, if they are looking for beneficial treatment in the future, the Russell Group institutions may be able to argue that it is universities outside their club that are driving the change.  As noted in a February 2022 blog the RG universities were growing numbers from China while other universities were taking the opportunities afforded by growth from India and Nigeria as source markets.  This may be important in formulating Home Office thinking because the Telegraph reported that “34,000 Nigerian students accounted for 31,898 dependants while the 93,100 Indian students accounted for 24,916.”

 The siren voices on the right are unlikely to let the issue rest.  Alp Mehmet, chairman of Migration Watch UK, said: “It has been clear for years that a significant number of those coming to study and their dependants use it as a route into work and settlement.  It is yet another mode of uncontrolled and uncapped migration, often, feeding the demand for low-skilled and low-paid workers.”  It is a level of angst that seems likely to note that the top non-EU nationalities granted British citizenship in the latest year were Indian (16,720), Pakistani (15,624), and Nigerian (9,445) nationals and that these nationalities accounted for almost a third (31%) of all grants to non-EU nationals in the year ending June 2022.

Not for very much longer, I’ve got to keep control

The clues are all there in Braverman’s conference speech but the key word is control which appears six times in 18 sentences and particularly in terms the mission “to control our borders.”  The economy is to be developed by “..encouraging business to invest in capital and domestic labour. Not relying wholly on low-skilled foreign workers.”  The echo of Mehmet’s words above are probably no accident.

But then we are taken back to Theresa May’s statement of March 2011 where she said, “We had too many people coming here to work and not to study. We had too many foreign graduates staying on in the UK to work in unskilled jobs. And we had too many institutions selling immigration, not education.”  It was the precursor to removal of post study work visas and a moment when international student growth in the UK began to fall rapidly behind that of Australia and Canada.

By January 2013, Prime Minister David Cameron was telling the House of Commons, ‘Frankly, there are lots of people in our country desperate for jobs. We don’t need the brightest and best of students to come here and then do menial jobs.’  The real point was that PSW visas had been introduced in the UK in 2002 when unemployment was around 5% but it then rose rapidly due to the global economic recession.  A big question facing UK higher education now will be what happens in summer 2023 if the UK unemployment rate, particularly among graduates, looks to be going the wrong way at a point when a General Election is no more than 18 months away.   

It is perhaps as well for universities that the traditional measure of graduate employment is aimed at the undergraduate market but it may not be long before attention focuses on the fate of postgraduates entering a tricky job market.  The shift in balance to having India as a major driver of international enrollments has altered the dynamics and it is slightly odd, but hardly unexpected given their record, that the OsF has not caught up with the situation.  With increasing numbers of international student likely to stay and take advantage of post-study work the likelihood of competition in the postgraduate market seems obvious.   

It may seem far-fetched to consider this as a potential problem at a point when the unemployment rate fell to its lowest rate since 1974 just three months ago but the headline hides a more complex picture.  Craig Erlam, a senior market analyst at Oanda, commented, “It’s not often that you see the unemployment rate fall to the lowest in almost 50 years and aren’t overjoyed, but that will certainly be the feeling at the Bank of England right now.”  Unemployment rising to 8% looks unlikely but it is also difficult to find anyone who predicting in December 2021 that average two-year fixed mortgage rates would have moved from 2.43% to 6% in less than a year with every likelihood of going higher.

But it’s the pelvic thrust, That really drives you insane

The sub-heading offers a slightly crude metaphor for the way that competitors in the international student market, particularly Australia, might take the opportunity to build on the UK’s uncertainties, tensions and failure to take advantage of its early opening of borders.  The announcement of new post-study work rights has already swamped the claims of Sunak’s claims of an attractive visa regime and it comes with AUS$36 million to improve visa processing for international students.  It’s the type of coordinated decision making and rhetoric that becomes it much easier to point out the potential problems in the UK.

Canada, which is not without its own problems, has also announced plans to increase the number of international students and foreign workers with extensive work experience for permanent residency in areas where there is a persistent labour shortage. A sub-text is that provinces and territories will have the freedom to modify their immigration streams to suit their own requirements.  That’s just a little more steam in the Canadian engine that has become an international student recruiting freight train.

While hoping for the best and that sense will prevail, it is difficult not to think that the current Government is disjointed, capable of extreme views and likely to pander to populist thinking as an election nears.  It has shown little regard for the concerns of universities or the predicament they might face if international students decline and the institutions have willingly driven recruitment at a pace which has brought new stresses on the system.  None of it bodes well for the future and particularly not if the predictions of a long and deep recession come true.   

NOTES

* Headline and sub-headings from Time Warp by Richard O’Brien/Richard Hartley, which featured in the 1973 rock musical The Rocky Horror Show, its 1975 film adaptation The Rocky Horror Picture Show, and a 2016 TV production.  If you haven’t done it you really should.

**Gavin Williamson (to 15 September 2021), Nadhimm Zahawi (to 5 July, 2022), Michelle Donelan (to 7 July, 2022), James Cleverly (to 6 September, 2022), Kit Malthouse (current but the record might suggest not by the time you read this…)

Image by annca from Pixabay 

Look Into UAC, UEA, UK, USA, USF etc

Back in May the roundabout of changes at INTO University Partnerships (INTO) was in full motion.  My blog suggested a go to market strategy based around University Access Centers and an emerging sales structure reflecting the differing fortunes of Russell Group partners and other universities in the UK.  Particularly intriguing was the decline of the University of East Anglia joint venture (INTO UEA) and the rise of Queen’s University Belfast.

Regular readers will has seen that INTO UEA then failed to file its 2020/21 Annual Report by the due date but it is now possible to confirm the extent of the continuing decline in enrollments.  The UAC strategy was duly launched, a new partner in the US gives some further sense of a possible direction and some familiar faces have returned while the top team continues to change.  A summary is timely.

Changing UK Enrollment Dynamics

For some time now it has become clear that changes in international student enrollment for the UK is making for unusual turbulence and may not be good news for pathway operators.  This year’s UCAS data shows that overall international acceptances at undergraduate level are down to their lowest level since 2015 (excluding the pandemic affected 2020) due to continuing declines in EU students.  As importantly for pathway operators the shift to Indian postgraduates as a dominant, growing market brings very different challenges after years of reliance on China.

With the inclusion of the confirmed INTO UEA numbers the overall picture for INTO’s UK operations becomes clear.  While the Russell Group aligned operations had a steeper year on year fall in the most recent, pandemic affected, year the longer-term trend was positive.  Non-Russell group operations appear to be struggling and in decline.

Note: Wholly owned subsidiary INTO Manchester is primarily aligned with the University of Manchester and is included in the Russell Group enrollments.  INTO World Education Centre is a “choice” option and included in the Non-Russell Group enrollments.

The new figures also show that INTO UEA, the first joint venture opened, saw its enrollments fall below those of INTO Queen’s for the first time.  The recently posted Annual Report confirms that this decline came with an operating loss of £4.66m.  Note 18 of the Report indicates that fees charged by INTO and UEA to the joint venture have also been “renegotiated” to “reduce the LLP’s cost base.”

The joint-venture’s problems have had an impact on UEA’s overall international student enrollment and a significant decline in international fee income.  For now, the partnership continues but it will be worth keeping a close eye on it over the coming year.  The direction of travel and hopes for recovery seem clear from the Annual Report with talk of “the expansion of year one pathways and Integrated Degrees” as the focus for the future. 

Meanwhile, Back in the USA

INTO’s declining joint venture portfolio in the US has been explored at length and the current court case with the University of South Florida will play out over time.  Court documents show that an “Emergency Motion for a Temporary Injunction to maintain the status quo” on 31 August was declined which is presumably what led to the joint venture being removed as a recruitment option.  Filings indicate the next steps are that “INTO USF LP and INTO USF, Inc. shall file their Amended Complaint on or before September 20, 2022, and USF Financing Corporation and The Board of Trustees of the University of South Florida shall respond to the Amended Complaint within twenty (20) days thereafter.”

Meanwhile, the seemingly inevitable drive for direct recruitment partners may be coming with the announcement of an agreement to recruit postgraduate students for University of Massachusetts, Amherst from Fall 2023.  What is difficult to understand about INTO’s recruitment approach is that their student facing INTO Study website currently only features two direct recruitment partners (Colorado State University and Arizona State University) while the corporate site features nine US “recruitment partnerships”.  Shorelight’s site seems far more in keeping with the smooth approach that has been increasingly popularized by the aggregators and demonstrates how far INTO has to go if the intention is to have a significant direct recruitment network of partners in the US.

If the Face Fits

INTO’s web site constraints may also mean that updating new appointments and departures is not a priority but some of the comings and goings are interesting. 

Particularly relevant to the next stage of US development may be the return of ex-North America MD/CEO David Stremba as Senior Vice President, Business Development.  He was pivotal to the early growth of INTO in the US and has spent some time with both Shorelight and Navitas in recent years, so should have a good sense of the competitor landscape.  The US structure is also developing with long-term player Yasmin Sefer becoming Senior VP, Partnerships (Private) alongside the Senior VP, Partnerships (Public), Steven Richman.

The INTO corporate website also doesn’t reflect the recent departure of a Group COO and US Executive VP or a strongly rumoured, significant change at senior finance level.  All that aside, INTO seems to have decided the team and structure that it thinks can move it forward and there appear to be an ample number of “senior” titles for a business with a reported adjusted turnover of £119.3m in 2021.   Time for action.

Image by Peggy und Marco Lachmann-Anke from Pixabay 

INTO Court as Joint Venture Sours

There are signs that INTO University Partnerships’ (INTO) relationship with the University of South Florida may be ending after a recent Court Evidentiary Hearing1 on 19 August 2022.  While no public record of a judgement has appeared, rumors suggest there are communications in circulation advising that enrollment to INTO University of South Florida (INTO USF) will cease.  If any authoritative source can provide an alternative explanation or clarification, I will be happy to correct any misunderstandings.

It is appropriate to note that both INTO and the University of South Florida still feature INTO University of South Florida on their websites at the time of writing (27 August). The INTO Study site for students also offers the opportunity to apply for courses at the university. This may be the result of a time lag or the possibility of further discussion and this blog is written in good faith to explore the background to the Court case and the joint venture’s history.

The underlying case for a university going to court to end a joint-venture pathway that was once among the most successful in the world deserves attention.  Publicly available court filings outline the case2 and material on the INTO Corporate and University of South Florida websites is used to summarize the history and other background about the joint venture relationship.  The source of further commentary is referenced through hyperlinks.  

Summary of the Case

A Court filing3 from USF Financing Corporation (USFFC) to the Thirteenth Judicial Court in and for the state of Florida Civil Division dated 15 July 2022 seeks a “declaratory judgment that the 2010 stockholders Agreement between USF FC, the Company4, and the INTO Defendants is terminated as of April 21, 2022.” The grounds are that the joint venture is “insolvent under both a balance sheet basis and inability to pay debts as they become due, and (b) has demonstrated a material adverse financial position where it could not perform all or a substantial part of its obligations..”.  The particular difficulties of pathway programs in the United States have been widely explored and the filing incorporates direct reference to my blog of February 2022 regarding the growing level of indebtedness of INTO’s US ventures.

With an eye on its responsibilities for “stewardship of public resources” the University of South Florida terminated the program in April 2022 and “initiated the process for the teach-out of the programs’ enrolled international students….”  The filing asserts that “The INTO defendants refuse to acknowledge the Stockholders Agreement termination and refuse to participate in the teach-out or develop the Plan to dissolve and wind-up the Company.”  There are a number of points made around the fiduciary duty of the three INTO appointed Directors of INTO USF Inc, to creditors and shareholders “once a company is insolvent” with a memo, the accompanying Exhibit G of the filing, asserting that “the INTO appointed directors have a conflict of interest.”

INTO University of South Florida

INTO partnered with the University of South Florida in 2010 and the case study on the INTO website asserts “extraordinary” enrollment and economic impacts.  The accompanying graph (reproduced below) suggests that even if this was true up until 2016/17 the ensuing years have seen a significant decline in enrollment to the pathway.  Enrollments look to have peaked at around 800 but have subsequently fallen by around 100 a year to stand at c300 (this would be supported by the USF Fact Books showing non-degree seeking international students declining by a similar amount).

Source: INTO Global.com

The Court filing includes INTO USF, Inc’s Financial Statement to June 30, 2021 (Exhibit E) showing a net loss of $3.276m that year and $206,000 the year before.  This is supported by the USFFC’s Financial Statements to 30 June 2021 which comment on “approximately $3.3 million of net loss incurred by INTO USF during the year ended June 30, 2021.”  USFFC’s share of INTO USF’s “net accumulated (deficit)” was shown as $1.794m.

As noted in the February 2022 blog “China Crisis for US Pathways”, since 2018 when INTO Illinois State University opened, “total level of indebtedness across all US operations has nearly doubled from £18m to £35m”.  This figure included the debts at institutions where joint ventures have now closed – Washington State University, Marshall University and Colorado State University.  The blog also reflects that INTO has become the 100% owner of what was previously a joint venture at St Louis University.

One feature of both INTO USF (the second INTO partnership in the US) and INTO Oregon State University (the first) is that they are listed in INTO’s Annual Report as Inc. and are C-corporations.  Informed opinion suggests that closely held corporations (which these appear to be) “have been held to higher fiduciary duty standards” and this may be reflected in the “conflict of interest” comment.  Later US joint ventures are listed as LLC’s where, “By agreement, parties can alter certain duties to expand, restrict, or eliminate fiduciary duties owing to either the LLC or the other members and managers”, which suggests there may have been advice leading INTO to pursue alternative structures.5

Summary

It is worth waiting to see any Court judgement and whether there is an appeal process but the filing and other financial statements seem definitive in outlining the decline of the joint-venture’s financial situation.  If the joint venture is closed it would leave INTO with six joint ventures in the US, as well as the fully owned St Louis University operation and the “comprehensive partnership” with Hofstra (which is not listed in INTO’s annual reports as having joint ownership). 

As well as the closures in the US there have been several INTO joint ventures shut down in the UK in recent years.  In addition, INTO has taken a controlling interest in the joint venture with Newcastle University and the financial arrangements at the joint venture with City University have changed.  As noted in a recent blog the yearly financial reporting for INTO University of East Anglia is shown at Companies House as overdue, for a joint venture under significant financial pressure.

On top of all that there are rumors of imminent changes at the top in the INTO Finance team and the return of a familiar face to the INTO North America team but that is for another day.

Notes

  1. Case number: 22-CA-006726 before Judge D.D. Farfante
  2. I am unaware of any written response by INTO University Partnerships to the case filed
  3. Filing#153460265 Efiled 07/15/2022 07:45:26 PM
  4. “the Company” is defined as INTO USF Inc which is the C-Corporation established in 2010 with stockholders USFFC and INTO USA LLC.  Its board has three nominees from INTO and three from USFFC.
  5. The purpose of this paragraph is to provide further information which may be relevant and the quoted elements comes from the source indicated.  There is no intention to give legal advice or guidance and readers are advised to seek appropriate counsel on company structures.

Image by Venita Oberholster from Pixabay