Thursday, June 04, 2015

University of Law in the Brave New World

Yesterdays rather innocuous news that the University of Law has been bought over by the Global University Systems means more for British Higher Education than it appears. It may be the start of a wholesale transformation of British Higher Education, for good or for worse.

For the uninitiated, the University of Law is one of the few private universities in the UK, and the only For-Profit one. It evolved from the College of Law, which was a Not-for-Profit entity, and which was bought over by Montagu Provate Equity, a PE fund with more than 4 Billion Euro worth of assets under management. Montagu buy-out eventually led to the transfer of University charter to a For-Profit entity after some hiccups, justifying the £200 million price tag. However, while this was one of the biggest PE deals in Education, it was also illustrative how little PE investors understand education. The valuation seemed to have solely based on the University license, which was not immediately available, but it ignored the fact that the market for legal education was collapsing at the time of the deal (in 2012) and the College of Laws core market, Graduate Diploma in Law (or the Law Conversion courses), was a pretty saturated market with limited opportunity to grow. So, their key calculation that the turnover could be doubled within a 3 to 5 year period faltered almost immediately after the deal was completed, plunging the well-regarded College into a strategic desperation of considering all sorts of unlikely options, including an MBA to save the day.

That Montagu has now exited after less than 3 years and it has sold the entity, now called University of Law, to Global University Systems, indicates that those strategies have perhaps failed, and what is being sold is the university license all over again. This should be particularly valuable to Global University Systems, which has grown out of an aggressive For-Profit provider who went through all sorts of regulatory troubles over the years. The school had perennial difficulty with accrediting universities, and its contracts were cancelled by all the universities it has ever worked with. It ended up with a high profile acrimony with the Quality Assurance Agency (who reportedly backed off from its even more critical report after a serious legal threat), a financial dispute with another university, and have been at the centre of at least two UK universities getting into trouble with Home Office regarding student visas. In 2014, all the universities working with the school decided to terminate the relationship, apparently fearing Home Office or QAA disapproval. Since then, its promoters expanded by purchasing other colleges (some of which have leveraged and perhaps abused the new student loan system to the extreme) and eventually leveraging the student numbers into building a war chest to purchase institutions to build a Laureate style conglomerate. In short, Global University System is the nearest British equivalent of American For-Profit.

While American Research universities top the university rankings, British Higher Education, as a whole, perhaps command greater respect. The reason for this, one would guess, is the unified regulatory system in the UK, and very high bar set for an institution to become an university. While one could celebrate American education, a no-name American university is justifiably viewed with suspicion. It may be a British Prime Minister who popularised the term, Bogus Colleges (an American President would not even know), but the universities in Britain remained above board because of the elaborate checks-and-balance system that regulate them. The new University of Law will be, if one could learn from track records, the proverbial elephant in the China shop! The fact that the British Higher Education policy needs a review, and sufficient safeguards and regulations that accept the For-Profit reality (rather than being in denial, a very British disease), is underscored further by this new acquisition. 




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