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Only third of mergers improve results

But colleges were more successful at combining than businesses, which had a failure rate of 91%

College mergers fail to improve standards in nearly two out of three cases, according to a study by management consultants.

The Hay Group, which looked at 16 FE colleges resulting from mergers, found that six showed clear improvement, six showed a clear deterioration and in four the results were uncertain.

This was a better record than for the business world, where the consultants, working with researchers from the Sorbonne, found a merger failure rate of up to 91 per cent. But they supported the government decision to tighten the criteria for merging colleges.

"The good news is that leaders of FE colleges seem to be getting it right roughly twice as often as their counterparts at the head of big business," the research report noted.

"The bad news is that roughly two out of every three mergers do not deliver improvements for students in terms of attainment or achievement."

The pace of mergers has slowed, but there were 27 under consideration at the end of last year. Colleges are developing other ways of working together: there are 13 proposals for federations, collaborations or shared service agreements.

The Hay Group said a successful merger was likely to involve two or three colleges, about seven committed leaders and a clear rationale.

Russell Hobby, Hay's associate director, said: "The fact that mergers are very difficult isn't a criticism of the FE sector, which is actually almost twice as successful as the corporate sector. They must be doing something right.

"Colleges are smaller institutions than some of the corporate mega-deals, so the integration challenges maybe aren't as severe. But perhaps the sector is paying more attention to their people and that's what drives success."

Among the most common reasons for failure was a lack of due diligence. "Almost every merger narrative included a ghastly moment when the cupboard doors opened and the skeletons fell out. Often this had a really serious financial effect," the report noted.

Some colleges said the excitement at the potential benefits of a merger tended to cloud their views of the potential drawbacks. However, those that confronted problems head-on were successful. Researchers said one college knew its partner was in a financial "mess" and got guarantees that the Learning and Skills Council to underwrite the merger for Pounds 1 million.

Successful projects understood how complex the process was and put time into managing the change.

The report concluded that allaying emplyees' fears about job security was also important.

Research by CfBT Education Trust shows a link between the size of colleges and their Ofsted grade, suggesting that the smallest colleges carry a half-grade penalty. But the Department for Innovation, Universities and Skills said size did not affect financial health or success.

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