The education market is witnessing a profound restructuring. The traditional governance model, once characterized by family ownership or small groups of individual shareholders, is increasingly being replaced by multinational education corporations and private equity funds. This shift in governance structure is gradually professionalizing and elevating university management to a new level.
This is not merely an upgrade in high-level personnel but an “institutional reform” within educational enterprises, aiming at scale optimization and capital professionalization. When financial flows are professionally planned and management is specialized, educational quality will step-by-step improve and flourish.
This transition reflects an inevitable market trend as domestic educational units face challenges regarding technology, international standards, and risk management. The entry of foreign investors and professional financial institutions helps discard the family-based or fragmented management mindsets of the past. In their place, international quality management systems are applied, and capital strengths are utilized to gain market share, ultimately benefiting learners and the nation’s future generations.
The Nature of “Capital Contribution” in Higher Education: When Intangible Assets Determine Transaction Value
Firstly, while machinery and equipment are the focal point in manufacturing, in higher education, intangible assets are the factors that determine the survival of an M&A (Mergers and Acquisitions) deal. Typical assets in a university model include Land Use Rights (LURs): although a tangible asset, this is often the most difficult to handle. Educational land is typically allocated or leased by the State with preferential rent policies. These incentives are only maintained if the land is used for the correct operational purposes. During capital contribution, determining the value of LURs faces a typical legal barrier: if the land was allocated without a land-use fee, its value cannot be included in the contributed assets for transfer purposes.
Secondly, Accreditation Indexes & Operating Licenses. These are considered the “passport” of the institution. A university that has achieved international accreditation (such as ACBSP, FIBAA) or maintains a stable student base will possess extremely high goodwill. Investors are not just buying a “product”; they are purchasing time, opportunity costs, the effort spent securing licenses, recognized quality accreditation results, and the cumulative student enrollment—all of which are invaluable intangible assets in valuation.
Asset Structure and Legal Barriers in Education M&A
In modern education M&A transactions, deal value no longer resides solely in balance sheet figures. It is an integration of three asset groups with distinct legal characteristics:
Multi-layered Asset Portfolio: Current capital shifts focus on maximizing the ecosystem of an institution. Tangible assets and LURs are the “anchor points” of university deals. While educational land is often large and well-located, its actual value depends on the form of ownership: land with one-time rental payment (which has mortgage and transfer value) differs significantly from land allocated by the State without land-use fees (which strictly limits the right of disposal).
Facilities and Infrastructure: Including lecture halls, laboratories, and IT infrastructure. In the EdTech era, digital infrastructure accounts for an increasing proportion of valuation due to the growing scale and quality of investment.
Intangible Values and Goodwill: This is one of the most difficult intangible assets to quantify but primarily decides the deal’s value. Goodwill is assessed based on Brand & Reputation, including the institution’s history and its standing among parents, students, and the market. Furthermore, international accreditations (like AACSB or ABET for the university level) serve as a “passport” to justify tuition increases and attract international students. Finally, the student population size is viewed as a stable financial stream, indicating the institution’s financial health.
Legal Restrictions and the “Land Use Purpose” Bottleneck: To eliminate land-related legal risks, parties must grasp the conflicts often found during Legal Due Diligence. Educational land often enjoys incentives (exemptions or reductions in rent). However, under the Land Law, entities benefiting from these incentives lack the right to mortgage, contribute as capital, or transfer the LURs. This creates a “valuation paradox”: the land area is vast, but its financial value on transfer documents may be zero.
Additionally, some universities operate on a non-profit basis to enjoy tax and land privileges. For private investors aiming to optimize profit, converting from a non-profit to a for-profit model is an extremely rigorous legal process, sometimes impossible without a strategic roadmap for divestment or the repayment of State incentives.
Key Considerations in University M&A
The Gap Between Corporate Management and Academic Governance: Investors often encounter a strategic misalignment between two systems: corporate management logic versus the specificities of academic governance. This is a direct conflict between two core legal systems and management philosophies.
Under the Law on Enterprises, an investor holding 51% to 65% of shares has absolute control. However, in education, this power is fragmented by the Law on Higher Education, where the University Council is the highest authority, deciding development orientations, the President’s position, and academic standards. By law, the Council must include representatives of lecturers, staff, local authorities, and ex-officio members (such as the Party Secretary or Union President).
The Risk of “Imposing Will” and Academic Resistance: A common mistake (especially by Private Equity funds) is attempting to impose purely financial KPIs on an educational entity. This creates a risk of governance crisis and “academic resistance.” Unlike corporate employees, lecturers and scientists highly value autonomy and professional prestige. If investors perform “radical changes” to educational philosophy without Council consensus, they face immediate brain drain and quality decline.
Seeking Consensus for Cooperation: The core value of a university lies in its intellectual team and community trust. A successful M&A scenario is one where the investor provides financial resources and digital management while respecting the democratic mechanism of the University Council.
Transfer Pricing Risks in Education M&A
In the non-profit sector, the “undistributed common assets” regulation is a major barrier. Accumulated assets and sponsorships do not belong to individual shareholders. Upon divestment, investors are typically only allowed to withdraw their initial capital plus a predetermined interest rate. All surplus must be retained for educational reinvestment.
To circumvent this, some deals use complex financial structures for “transfer pricing” to move value outward, such as: management consultancy or branding franchise contracts with unusually high fees paid to the investor’s related parties. Exclusive auxiliary service contracts (logistics, canteen, digital infrastructure) at non-market prices.
Learner Rights and Post-M&A Responsibilities
Learners are the subjects directly affected by ownership changes. A paradox often occurs when new investors, driven by profit optimization, aggressively adjust training portfolios and tuition policies, creating deep conflicts of interest.
Conflict between Business Strategy and Training Commitments: Post-acquisition pressure often drives “operational purging,” such as restructuring majors (eliminating traditional or low-enrollment majors to focus on “hot” high-margin fields) and tuition adjustments without a suitable roadmap. “Legacy Abandonment”- Students in phased-out majors may face a shortage of teaching resources or the inability to complete their programs on time.
Current laws emphasize learner rights but still contain “blind spots,” such as a lack of specific regulations forcing new investors to maintain the exact tuition roadmap and quality for existing cohorts. Therefore, investors must proactively establish transparent transition roadmaps and commit to maintaining core training conditions to ensure ethical responsibility and optimal legal risk management.
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Dr. Le Thi Dung
