Do the numbers add up for UCC-IMI merger?
The final hurdle in a merger between UCC and the Irish Management Institute (IMI) is to be jumped today, but there has been precious little examination of the deal.
Questions arise as to whether the deal represents good value for the exchequer-funded UCC and on what basis has management at the college decided that the merger is advantageous for the college.
At a time when third-level funding is at crisis point, is it prudent for the Cork university to borrow €18m in order to take over a private sector entity that recently went through major financial travails?
A further issue arises as to the practice over the last five years of UCC faculty members lecturing in the Dublin-based institute in a manner that appears to breach UCC employment policy.
The IMI has provided customised management training for companies for more than 50 years. Its income is generated exclusively from this sector. Over the years, its board and council have been populated by the great and good of Irish business.
Today, the 360 members of IMI are voting to ratify the proposed merger. This will involve a deal in which UCC pays the IMI €18m, mainly for its campus in Dublin’s Sandyford, and pledges to invest another €2m in the IMI. The funding is by way of a loan from AIB.
The merger was first mooted in 2009. According to a circular sent to UCC staff in June of that year, the proposed merger came about when “the board of IMI decided to enter into exclusive negotiations with UCC”.
Why the IMI did not approach one of the Dublin universities is not explored anywhere in the circular, but the staff were told: “You will understand the necessity for absolute confidentiality in discussion of this kind involving a private entity”.
Problems arose when the IMI’s financial position deteriorated sharply, largely due to a collapse in training income because of the recession. The merger was postponed, but both entities decided to initiate some form of alliance.
The IMI had a bad recession. Its revenue went from €14m in 2007 to €7m in 2010, with the latter year resulting in a loss of €5.4m. (The institute has returned to profit in the last two years.)
While talks of a merger were put in cold storage, an official alliance between the two entities was announced by Enda Kenny in 2012.
“The alliance will establish a UCC presence in Dublin,” the press release at the time stated, although the advantage of such a presence was not outlined. The president of UCC, Michael Murphy, noted on the occasion that there was a “synergy and vision at the heart of this alliance which is shared in equal measure by both institutions”, which included an objective to “integrate leading research into teaching to enhance the overall quality of Irish management”.
Since then, the advantages to UCC have not been clear. The Irish Examiner asked the college how much income it had received from the IMI over the course of the alliance, but the question went unanswered.
One development during the alliance was that a number of UCC staff acquired work lecturing at the Dublin institute. According to UCC policy on “out of hours working and additional payments to staff”, any lecturing work done outside the college must be conducted “out of hours”, which means after 7pm on weekdays or at weekends.
In addition, it states that work must be advertised and “additional payments to staff for teaching during the working day are not permitted under this policy”.
The Irish Examiner asked UCC whether it was happy that this policy was observed, particularly in relation to advertising work and the hours within which such work could be done.
The reply stated: “The IMI operates a teaching model whereby its educational programmes are staffed by a panel of over 200 leading faculty from Ireland and around the world. This panel includes many UCC faculty. All teaching at the IMI is contracted by the IMI on an individual basis with the relevant faculty.”
Last year, as the recession lifted, plans were put back on track for a full merger and received the full backing of management in UCC.
A draft memo circulated to management in January 2015 stated that the merger could go ahead, as the financial problems that had been affecting the IMI were being dealt with and that a pension deficit had been sorted out.
The draft memo noted that “a communication strategy would be required to ensure good buy-in from UCC staff to the merger proposal”.
Another issue that raises questions about the merger is that of pensions.
Historically, there was some major problems with pension fund deficit in the IMI, which was inclined to award major pensions to its top personnel. As far back as 2003, adjustments had to be made in the institute’s accounts to fund a pension of a former chief executive to the tune of €1.34m.
In a circular to IMI members urging a vote for the merger which was published in the Irish Times last week, it was stated that UCC will help the institute “discharge” its debts and pension obligations.
When asked about responsibility for the IMI pension fund, a statement from UCC read: “UCC is content that the IMI is in good financial standing and that the IMI will discharge its own pension fund commitments.”
It is therefore unclear whether or not the public body will sort out the considerable pensions for the private institute it is buying.
There may well be a case for the merger. In the statement issued to this paper, UCC pointed out a number of positives in the deal, including that “it is the strategic intent of UCC to develop a world-class reputation and capability in all its aspects of business education. The merger with the IMI is a crucial part of this strategy.”
The questions remain, however, principally whether the deal represents value for money for the college — particularly at a time of a severe funding crisis. Last December, Dr Murphy told this newspaper that the university was “at the end of the line” in terms of absorbing funding cuts without damaging the quality of education. The university has undergone a 22% cut to its funding since 2009.
The merger certainly represents a good deal for the UCC staff members who have acquired extra work in the IMI. It could also be argued that an association with the IMI would be a prestigious calling card for the college, although the value of that is arguable.
The advantages for the IMI are perfectly obvious, not least in acquiring shelter under UCC for the next recessionary storm and security about the distribution of generous pensions.
Whether that implies the deal is worth taking out a €18m loan at a critical time for third-level funding is another issue.
As one academic who is familiar with the merger put it: “If the IMI was so damn sexy, why didn’t one of the Dublin colleges come in for it? That would have been the obvious move.”
A spokesperson for the Higher Education Authority said the HEA is monitoring the merger process between UCC and IMI, adding that all Irish universities are autonomous bodies.
The IMI confirmed to the Irish Examiner that its board had recommended to members to vote in favour of the merger at today’s meeting.
“This proposal follows on from five years of a successful strategic alliance with UCC and two years of extensive merger negotiations.”
Questions as to whom would be liable for IMI pension obligations and whether or not the pension fund owned the institute’s campus were not answered.
“No further comment will be issued at this juncture,” the spokesperson said.
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