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9 Considerations for Charter School Mergers in an Era of Limited Budgets

Since March, school funding experts have sought to understand how the economic turmoil coming out of the COVID-19 pandemic would affect school revenue. Most analysts agree that the impact will be significant and will be felt most by those who are the furthest from opportunity. Unfortunately, charter schools — which nationally enroll a student population that is 52 percent low-income, 25 percent Black, and 34 percent Hispanic — are particularly vulnerable to variations in state funding. 

Charter schools struggling with financial sustainability may consider whether the school’s mission might be better served by merging with another charter school. However, while charter school mergers can work, they are far from a simple solution and must be approached carefully.

As our colleagues Lina Bankert and Lauren Schwartze have previously written, a “merger” can take many shapes but, fundamentally, it involves joining together two or more organizations as one entity — through a formal legal agreement — in pursuit of a common goal. In the current financial climate, financial sustainability may be what prompts schools to explore a merger, but any merger conversation should start by defining all of the reasons why it could be a strategic move for each partner in the merger.

These nine considerations will help school leaders determine whether a merger might make sense for their school:

While a merger can support better financial efficiency in the long-term, financial efficiency is neither immediate nor guaranteed. If school leaders are pursuing a merger first and foremost because they believe it promises immediate financial benefits, they should stop and reconsider. A successful merger between two or more charter schools requires a short-term infusion of funding to support the merger process. To conduct due diligence, support internal decision making, plan implementation, and ensure a smooth transition period, school leaders will need financial resources for necessary staff time and legal expertise. Any long-term financial efficiencies will only occur after an initial up-front investment that can sometimes total hundreds of thousands of dollars.  

While a merger can increase financial strength by achieving a larger or more stable revenue base (via combined student enrollment) and by enabling some economies of scale, in practice the additional revenue is often used to support a high-quality school model, via investments to support rigorous and consistent instruction for the merged institution. As a result, a merger should not be thought of as a strategy for “saving money” per se, but instead as a way to combine resources to provide a high-quality education to more students, with the stronger financial footing that comes with that.   

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