International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, May 5, 2017

Purdue University Acquires Kaplan University in Major Online Expansion

[The President of Purdue] Mr. Daniels, a former Republican governor of Indiana, described the acquisition as adding a "third dimension" to Purdue, along with its research-rich flagship in West Lafayette, Ind., and its regional campuses.  For Kaplan and its parent company, Graham Holdings, the deal offers a potentially profitable exit strategy for an operation that has seen its bottom line battered for several years by falling enrollments. (Kaplan now has 32,000 students.) Read the Chronicle of Higher Education article here.

See the Portland Press Herald article that explains: Under the contract, Graham will transfer Kaplan University’s online programs, as well as its 15 campuses and learning centers – 2000px-US-DeptOfEducation-Seal.svgwith 32,000 students – to the Purdue-related nonprofit. Kaplan will then operate them and guarantee that Purdue’s venture, for five years, receives at least $10 million a year from Kaplan’s revenues after expenses.  After that payment, Kaplan is entitled to reimbursement for its own cost of providing services, plus a fee equal to 12.5 percent of the Purdue affiliate’s revenues.

Critics say that the acquisition and merger of Kaplan students into Purdue, while producing strong profits, will drag down Purdue's reputation because of the mismatch of Purdue's selective admissions and academic research faculty with the open degree enrollment the 32,000 Kaplan students and 2,462 Kaplan non-academic faculty joining the Purdue brand, plus the hundreds of thousands of Kaplan alumni who will now identify with Purdue.  Read the Chronicle of Higher Education article here.  See Inside Higher Ed "Faculty members also are concerned that bringing a for-profit institution under the Purdue umbrella could hurt the university’s brand and public image."  Purdue lobbied and had signed into law that its Kaplan acquisition will not be subject to open public records laws. See USA Today.

But if the new distance education side of Purdue generates annually hundreds of millions of dollars of net surplus to Purdue's bottom line, and that translates into big faculty raises and scholarships for high SAT and ACT scores that impact the ranking, then the deal may be a huge win-win for faculty and student alike regardless of the impact to the brand reputation.   Purdue's president will be hailed a hero to have the foresight to acquire the for-profit.

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