Alliant International University in California has become a public benefit corporation, creating possibly a third link between nonprofit and for-profit education.
Alliant is a regionally accredited university which offers its students graduate and professional degrees in the areas of psychology, education, and business, among others. It is the first university of an expected many to come to seek benefit corporation status and join Arist Education System. The status aims to encourage companies to spend more effort focusing on the needs of society rather than their own bottom lines, writes Doug Lederman for Inside Higher Ed.
"There certainly was lively debate around the university much of last year," said President Geoffrey Cox of the change of control, which WASC's Senior College and University Commission approved last summer. "In the end, there was pretty decent consensus that this was a good strategy."
The system is a new network funded by the German media corporation Bertelsmann, which is aiming to train health professionals.
Bertelsmann, which has recently made education its top investment priority, will take a controlling stake in the school in the hopes of diversifying and expanding upon the business of operating universities. The company has made its goal to create $1.13 billion (1 billion euros) in revenue from a global market estimated to be worth $5.5 trillion this year and $6.4 trillion by 2017 by advisory firm GSV.
GSV went on to say that of those funds, $1.3 billion will go to private companies. The rest will be controlled by governments.
Bertelsmann believes the market for health and human sciences universities within North and Latin America to be around $4.1 trillion, and the market offers operating margins of up to 30%.
The stake will offer the company access to the school's data and research. Bertelsmann hopes to strike similar deals in the future.
"Over the next few years, we will build a network of universities that deliver innovative education programs in various fields of the health and human sciences," Bertelsmann's Chief Executive Thomas Rabe said.
The company also bought e-learning business Relias Learning for $540 million. It also controls broadcaster RTL and co-owns book publisher Penguin Random House.
Bertelsmann faces competition from Pearson and McGraw Hill within the global education market.
While Cox said the university will need to make structural changes in order to increase their programs while keeping tuition low, he added that in order to become a traditional business, "you have to give up a lot of the academic values that sustain most of us. This was a way of not having to give that up, but still getting access to public capital markets."