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In the business arena, mergers and acquisitions are commonplace; not so in the realm of business schools. Deans around the world will therefore be watching closely how events unfold in the UK’s Thames Valley, west of London, as Henley, one of Europe’s best-known management colleges, merges with the business school of one of the UK’s strong academic universities, Reading.

When the two become Henley Business School on August 1, it will be the merger of a largely unknown but academically rigorous university department with a high-profile but mature management brand. The good news is that the relationship will be hugely symbiotic: Henley brings with it a portfolio of MBA degrees and executive and corporate programmes; Reading’s strength is in undergraduate and specialist masters degrees. Henley supplies the softer management skills and corporate contacts, Reading the hard-nosed academics and research capabilities.

Add to that the fact the institutions are just 10 miles apart and the accommodation is perfectly suited to the different programmes on offer – undergraduates and masters students can enjoy campus life, executives can relish the riverside rural retreat – on paper it looks a perfect fit.

No one is denying, though, that the merger was born out of necessity as much as aspiration. Henley had reported five years of financial losses, though some of that was due to investment in refurbishing the ageing buildings, says Chris Bones (left), who becomes dean of the newly created Henley Business School next week. “The last time the building had been painted was 20 years ago.”

The management college has seen a decline in student numbers as well as a detriorating decor. At one time, the college had more enrolled distance-learning MBA students than any other institution in the world. In 2003, Henley had 6,695 students enrolled on its programme, according to data submitted to the Financial Times that year. Five years on, that figure is down by nearly a quarter to just more than 5,000.

In particular, Henley lost one of its largest distance-learning MBA business clients, IBM Europe, to Warwick Business School two years ago. (The programme enrols between 150 and 200 IBM managers each year.)

Though the Open University Business School, the other established distance-learning MBA brand, has seen an even greater decline in numbers over that period, universities such as Manchester and Liverpool in the UK are growing fast.

The main competition is coming from newly established players in the US and Asia. The University of Phoenix, in the US, has quadrupled its MBA student intake in five years, to about 40,000, and U21Global, which was set up recently in Singapore, is growing rapidly in Asia and Africa and already has 3,000 enrolled students.

The full-time MBA is faring better. The number of enrolled students on the one-year programme is just 40, but that is double the intake of a few years ago.

Professor Bones says that one of his aims is to increase the number of students on the full-time MBA to 50 or 60 and on the executive MBA programme to 60 or 70 a year.

In the early 2000s, Henley also pulled back from overseas expansion. In the past decade Henley has retrenched, closing overseas offices in Singapore, Malaysia and Greece, although it retains 12 local offices outside the UK, eight in Europe.

While he acknowledges that necessity forced the alliance, Prof Bones, a former human resources director at Cadbury Schweppes, points to the global trend in business education in which the top schools such as Harvard, MIT Sloan and Stanford are developing links with other university departments – engineering, medicine and social sciences – in order to deliver industry-informed degree and executive programmes.

In the UK the business schools at the universities of Oxford and Cambridge have taken a similar stance, and Henley will follow this lead.

Had Henley continued on its existing path, it would have plunged into mediocrity, he says. “We could not have stayed independent and stayed in the world league. We’re here to deliver world-class education, not to be independent.”

The combined business school will certainly have critical mass, with annual revenues of about £40m, of which just over half will come from the old Henley. It will also have close to 150 faculty, about 50 of whom will come from the management college.

Much has been made of the fact that since Prof Bones took over as principal of Henley in October 2004, about 10 faculty have left the college.

He defends his position, saying this was largely because of a mismatch between the faculty and the programmes being taught. Indeed, the college was paying the faculty for 1,000 hours of teaching which were not being delivered, while the corporate programmes were stuffed with expensive adjunct teachers from outside the college.

One of the biggest challenges for Prof Bones will be to get faculty working together across the campuses.

No one thinks that will be achieved quickly or easily. Some of the Reading faculty, though, are keen to work with executives and MBA students – Michael Mol, senior lecturer in strategic management, is one.

A visiting researcher at the Management Innovation Lab at London Business School, he says the merger will enable him to get his work out to the relevant people more easily.

He adds that he is also looking forward to teaching on the strategic management course on the MBA programme and working with corporate clients.

While many academics at Reading were appointed to teach on the undergraduate degree, and executive teaching may be inappropriate for them, Mr Mol says faculty are positive about the merger.

Prof Bones will certainly hope that goodwill continues.

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