Arkansas, Idaho were not first schools to work on buying the University of Phoenix

Tuskegee University, a private, historically Black university in Alabama, had considered buying the University of Phoenix in May 2021 — nearly two years before either the University of Idaho or the University of Arkansas had disclosed their interest in buying the private, for-profit online university.

The University of Arkansas system came close to purchasing the University of Phoenix in early 2023, but a majority of board members shot down the proposal. That paved the way for the University of Idaho to strike a deal in May 2023 to buy Phoenix for $550 million.

Up until now, we’ve known only about the Idaho and Arkansas proposals.

“Tuskegee University was one among a number of institutions that University of Phoenix had very initial conversations with regarding an affiliation and ultimately, we progressed further with others,” Andrea Smiley, vice president of media relations with University of Phoenix, said in a phone interview.

Smiley said she didn’t have details about the Tuskegee proposal, and also did not have a specific number for how many other institutions the University of Phoenix was in discussions with.

She also said she didn’t know what factors led to a deal with Tuskegee not coming to fruition.

Officials from Tuskegee University declined to comment.

“The conversations were confidential, and the university does not have a comment on this now,” according to an emailed statement from a Tuskegee spokesperson.

University of Phoenix purchase details

A slide deck from May 2021 that appears to be a presentation seeking investors for the acquisition shows some of the details of the proposal.

The purchase price was $500 million, according to the slide presentation, with a cost of debt of about $200 million to be paid over 20 years. Tuskegee had projected that enrollment would be 150,000 by 2029 and annual revenues would be $1.5 billion.

University of Phoenix enrollment is 85,000 with revenues of $800 million, according to previous public statements in the University of Idaho and Arkansas hearings.

“By acquiring the University of Phoenix … Tuskegee can create a new model for higher education,” according to the slide presentation.

The summary page noted that the model would be national in scale, career-oriented and focused on serving the needs of a diverse array of adult learners, including a large minority population.

Providing services to other historically Black colleges and universities, or HBCUs, was a big part of the plan.

“Tuskegee will also leverage the University of Phoenix infrastructure to create a new Shared Services Unit to serve both Tuskegee and other HBCUs with effective and low-cost services, accelerating HBCUs’ entry into the digital age,” according to the slide presentation.

Smiley said that “initially there was some excitement about the possibility because they are an HBCU, and there’s some similarities in the populations that we serve, but I think it just ultimately didn’t come together.”

The Bill & Melinda Gates Foundation provided funding to Tuskegee University in 2021 to explore ways to scale regionally or nationally to serve more underserved Black and Latino students, according to an emailed statement from a foundation spokesperson.

“Our grant supported Tuskegee University as it evaluated strategies to operate at a more national level and funded their ability to do financial due diligence on potential partners like the University of Phoenix,” the statement reads. “Tuskegee University conducted all evaluations of scaling partners and diligence checks through its own independent decision-making process.”

Like the University of Idaho plan, the Tuskegee proposal envisioned converting University of Phoenix into a not-for-profit school that would “empower and obligate management to prioritize mission over return.”

Due diligence

Robert Shireman, a senior fellow at the Century Foundation think tank and former deputy undersecretary at the U.S. Department of Education in the Obama administration, said he was brought in as an expert to consult on the Tuskegee deal.

Shireman said he wasn’t a decision maker and wasn’t privy to the details, such as purchase price or terms, but was there to raise questions. In the end, he said, he doesn’t even know which party walked away from the potential deal, which was never disclosed publicly.

But he said Tuskegee was wise to bring in experts who might be skeptical and raise red flags.

Some of the questions that he had at the time of the Tuskegee proposal included whether the University of Phoenix would remain a separate institution with its own students under a different name, who the board members would be and what their authority would be.

He questioned whether money would be needed to make improvements and where those funds would come from.

He also noted at the time that the deal was “not expected to be meaningfully financially accretive in near term for TU-Phoenix” — meaning not increasing revenue.

In fact, the slide presentation shows a need for investments of $15 million to $20 million per year into student success initiatives for Phoenix, $5 million per year to improve both access to and student outcomes at Tuskegee, and up to $90 million per year to reduce the cost of tuition for Phoenix and Tuskegee students.

Other questions Shireman raised were how the acquisition would be financed, what was being purchased and how the purchase price was determined.

“It is perfectly appropriate for the buyer to say, ‘Let me go see who’s been critical of University of Phoenix and see if any of them would be willing to come in and tell me, if I were to announce this, what I’d be hearing from them,’” Shireman said in a phone interview.

It’s not clear that kind of skeptical due diligence has happened with the University of Idaho’s planned purchase of the University of Phoenix, which remains under fire from skeptics.

“My perspective is that Apollo (Education Group, owner of the University of Phoenix), in trying to sell University of Phoenix, they kind of lure these potential buyers into private, confidential discussions using NDAs and create the impression that they’re providing all of the information that is needed,” Shireman said.

In Idaho’s case, several university officials signed nondisclosure agreements in the weeks prior to a public announcement that came one day before a State Board of Education meeting — at which board members spent 90 minutes listening to a presentation about the deal before voting to approve the purchase.

“Unfortunately, instead of doing what they really should do, which is to perform due diligence, identify people who might have an alternate point of view and get broad advice,” Shireman said, “instead, they basically announced the deal as almost a done deal and it means it has too much momentum, rather than allowing for public and expert input into whether it’s a good idea and whether the price and terms of the agreement are appropriate for the university.”

Some Idaho legislators are trying to slow down the proposal.

Members of the Idaho House last week approved a resolution that urges the State Board of Education to reconsider the deal and gives the Legislature the go-ahead to file a lawsuit, if needed, to stop it, according to Idaho Education News. The vote in the House was 49-21.

That resolution is pending in the Senate.

With no one talking about the details of the Tuskegee proposal, it’s hard to conclude why that deal didn’t happen.

But one thing is clear: Tuskegee seems to have done a more thorough job of being skeptical when doing its due diligence on purchasing the University of Phoenix.