So the College of Law has announced it is to be sold to a Company managed by Montagu Private Equity. We do not know the price but the proceeds of sale will be in excess of £200million which will go to a charity –The Legal Education Foundation. The Foundation promises “to promote the advancement of legal education and the study of law for future generations of students through bursaries, scholarships and grants.”
It may be a seminal moment in legal education in the UK and, it is worth emphasising, possibly globally.
The first reason is the creation of the Legal Education Foundation. £200m is a lot of money and that gives the Foundation the power to have a powerful influence on legal education. Initial emphasis has concentrated on the possibility of the Foundation funding students. That has a certain symmetry to it, given the oft stated critique of the oligopoly of providers overcharging students without training contracts, and is good PR. Give the students something back and everyone applauds. Go beyond the lipservice paid to diversity concerns and there will be some cheering. David Yates, Chairman of the College’s Governors words remind us that the College of Law’s specific object is the advancement of legal education. Improving funding for students who cannot afford it is certainly to be desired but I’d expect a more strategic approach from any Foundation that seeks to develop and improve legal education. To do so at arms length from any commercial interest would be quite a legacy from any sale; although naturally enough it is easier said than done.
The second reason this may be an important, though not seminal, moment is the immediate impact on the College. I do not know anything about this particular private equity company, but there seem to me to be a few obvious questions to be asked. One is, who will be the next owners? My understanding is that private equity companies typically look to sell on purchases within a five year time frame and with a return of 30-35% expected as typical. The other more pressing issue is, what will they do in the mean time to get a good return and make the College saleable? Ian Fraser has pointed out the dysfunctional tendencies of some venture capital deals on his excellent blog (http://www.ianfraser.org/) as has Alex Brummer. It is possible to see the sale of the College as part of a much broader trend of the UK divesting itself of ownership of its own businesses a trend that has taken in Boots (who moved their HQ to Switzerland), ICI, Cadbury’s, Millets and Jaguar Rover amongst others. Dysfunctional activities can include asset stripping, and loading the business with debt that then emaciates the business for years to come (partly because of the tax advantages that accrue).
Venture capital can also be the spur to radical investment and change.
It may well be that the 5 year time line is not what is contemplated in this case. Even in the (now more) rapidy changing world of legal services, it is to be doubted that truly radical growth will occur in five years. At least one of the College’s prime markets (the Legal Practice Course) is contracting currently. It is early days for its foray into law degrees and the Bar Professional Training Course, I suspect, does not make it much money. As to the risk of asset stripping or saddling the college with debt, through sale and leasebacks for instance, I am somewhat comforted by the fact that (for now at least) Nigel Savage remains at the helm. I should also note the College’s statement that, “The Governors were clear in their views that Montagu would be an excellent guardian of the College, ensuring a continuation and enhancement of the focus on academic excellence, exceptional teaching and client service that has long characterised the College’s work.” They have also appointed a former Vice Chancellor, from Hertfordshire University, as non-executive director responsible for academic standards.
So let us assume that the strategy is one of relatively, but not precipitately, quick and strong growth and put to one side any cost cutting or commodification of education that may be associated with that. (N.B though – my concerns about the College’s approach to seeing legal education as divorced from the broader custodianship of legal knowledge and research is here). How will a Montagu backed College achieve that?
The UK market for law students is contracting modestly at the undergraduate level and more severely at the postgraduate level. Whether this is a permanent contraction or part of the normal economic cycle remains to be seen. The US market is contracting more strongly. The College will, I assume, be looking to develop its toehold in the market for undergraduate law degrees much more strongly. The sleepy world of Undergraduate law may be in for a rude awakening. They are also likely to look more firmly East, where expansion in ‘high end’ legal services markets remains a more plausible possibility than in the Anglo Saxon west. The launch of a Singapore campus is a very important development in this context. The general tenor of legal service and legal education debate, where the College has led to charge against key regulatory restrictions, is also increasingly throwing up the possibility of an already global market place for neophyte lawyers developing into a global qualification.
What I would expect the College to seek to do is to establish itself as a globally recognised provider of legal education that transcends (as far as possible) national boundaries. The interesting question is whether an institution focused narrowly on law, which assiduously cultivates its links with professions and professional bodies, can outmanoeuvre the elite law schools connected to the World’s most prestigious Universities with all the advantages that those Institutions have. I believe there are reasons why the professions would be unwise to do see this as a good thing, unless the College changes its approach to research and development. But who’s to say that the College could not change its ways, or that the professions would listen to academics pleading that the baby not be thrown out with the bathwater?