Monday, 12 March 2012

The latest on the College of Law

The Times Higher has carried another story on the sale of College of Law. This confirms that the proposed model is for the chartered institution to continue existing:
Under the model being discussed, the College of Law would set up a company to control its assets and degree-awarding powers, then sell all the shares in that company to the private buyer.
The charity trustees would then establish a fund with the proceeds, retaining the charitable status and the Royal Charter. This fund would support the study of law through bursaries and scholarships for students at a range of institutions, thus meeting charitable objectives.
I do not think this can quite be correct. In particular, I do not believe that the company can 'control' the degree-awarding powers. The practical exercise of those powers might sit with the company but the control will have to remain with the chartered corporation. For evidence that I might be wrong, though, read Andrew McGettigan.
It is revealing that the preferred bidder was not Pearson, as widely predicted, but a private equity operation, Montagu, with no previous exposure to the education sector that I can see. Pearson should have been able to get better value from the degree awarding powers than other bidders if they had genuinely been for sale so they should have been able to afford a better bid if that were the case.
So I will give myself some points for predicting the right model for the sale. And as the reported price has come down significantly from the £175-£200 million previously reported, my original guess at the asking price doesn't seem so far off base either. Finally, I was intrigued to read that Montagu places primary importance on working with the existing CEO
Our focus on incumbent CEOs means that working in partnership with the management team is critical. We support management through each stage of the deal process and provide as much resource as required to make the investment work. We welcome early dialogue with CEOs to better understand their aspirations.
I don't believe (as I've explained here and here) that there is really any likelihood of existing institutions being forced into the hands of private equity by financial disaster in the short or medium term. This model - where the incumbent leaders of a university might turn their current control into lots of cash by an alliance with friendly financiers - seems a lot more plausible.  It will be an interesting test of the integrity of our VCs.

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