Receivership Case Study

Case:
Myers University
Cleveland, Ohio
Higher Education
2008

Challenge

In late 2007, in the midst of a potential sale, Myers University was at risk of closing its doors forever. Its dire financial situation had placed hundreds of jobs and millions of dollars in government educational bonds at risk. The institution’s accreditation was also in jeopardy, with thousands of student credits hanging in the balance.

The court appointed Dottore Companies as Special Master to stabilize Myers University and prepare it for transition.

Methodology

Within 24 hours of appointment, Dottore leadership conducted a financial review, identified critical success factors, and spoke with key influencers to determine a plan of action, which included:

• Instill short-term fiscal responsibility: Dottore secured a Title IV funding program and implemented immediate cost reductions that allowed the University to continue This included:
  • Restructure bond payments
  • Identify and sell excess assets
  • Negotiate with union representatives
• Identify transitional leadership: Dottore assigned Dr. Joyce Banjac as interim president and board chairwoman, who would support tough transitional decisions and achieve buy-in among core staff and union influencers. The board was also replaced with neutral educational experts.
• Assess potential buyers: Applying extensive business experience and judgment, Dottore determined that the initial buyers had questionable motives that threatened the reputation and merit of the University. Twelve additional prospects were interviewed.
• Oversee sale: Dottore negotiated the purchase price with top bidders. The final sale was awarded to the highest bidder who also promised to maintain the integrity of the school structure and mission.  
• Disburse recovery funds: Total recovery was allocated across government bond and tax agencies, lenders, and creditors with far better than average recoveries.
  

The Breakthrough

While the diversity of two revenue streams - online and brick and mortar - was a strong factor in the valuation process, Dottore asked deeper questions of prospective buyers to uncover the non-profit University’s true, intrinsic value: Accreditation. It’s rare for a for-profit, distance-learning organization to have regional accreditation. For many for-profit suitors, this asset would be a strong addition to their growing portfolios.

The Dottore leadership team traveled to Chicago to meet with the accreditation board and ensure that the accreditation would be preserved during acquisition. Once confirmed, this essential asset was leveraged to maximize value for all interested parties.

The Results

Total recovery: $10 million, representing an 82% recovery of the organization’s outstanding debt.

• State of Ohio and Port Authority bonds were recovered 100%.
• Secured lenders received a better than average return of 75%.
• Students and staff continued business as usual with no loss of credits or jobs.