The auction of BPP University has stalled after suitors became jittery over protracted political uncertainty and baulked at the vendor’s inflated price expectations, EducationInvestor Global can exclusively reveal.
Several sources have told this publication that the sale of the private college has been delayed due to a combination of investors’ lacklustre appetite, “unrealistic” pricing expectations, and potentially uncertain trading conditions stemming from Brexit and the outcome of the UK general election on 12 December.
BPP is owned by private equity-backed Apollo Education Group, which paid more than £300 million for the business in 2009.
Apollo, which is based in the US and owns several universities, appointed bankers at Morgan Stanley to sell its stake in BPP in June.
However, sources say that any deal is unlikely to be struck before the year’s end.
And, should a sale come to fruition, any price paid for BPP is likely to be far lower than the “mid-teens multiples” of its £35 million earnings that Apollo was initially targeting, one source said.
A back-of-an-envelope calculation indicates that Apollo was seeking to net more than £500 million in the sale of BPP.
The source added: “[The] seller price expectations [were] too high, and the buyer appetite [was] just not there due to, inter alia, Brexit concerns.
“I assume they will wait until post-Brexit”, the current deadline for which is 31 January, 2020.
“I can’t see anything getting done before then.”
While on paper a higher education institution, BPP is akin to a further education provider due to its expansive apprenticeship-degree offering and range of training courses it delivers in the fields of law, accountancy and financial services.
Another untimely factor that has dampened buyers’ interest in BPP, according to one source, is the awarding of a contract to educational services firm Kaplan to provide the Solicitors Qualifying Exam (SQE) – a new centralised law exam set to be introduced in September 2021.
The SQE will overhaul the way solicitors in England and Wales qualify.
Kaplan winning the contract to provide the SQE is “significant,” said one source, because it could skew current market pricing and competition levels and thus impact BPP’s bottom line.
However, another source described the development as a “red herring”, saying “this is a contract to design and administer the [SQE] examination” and is “separate from the training contracts” for which BPP and the University of Law, another for-profit university, compete.
The UK’s for-profit higher education market has come under intense scrutiny this year after GSM London, a private university owned by buyout house Sovereign Capital Partners, crashed into administration in July.
The futures of thousands of students and hundreds of staff were thrown into flux as a result of GSM London’s closure, reigniting concerns over the commercialisation of higher education in the UK, where the vast majority of universities are non-profit entities.
Unlike GSM London, though, BPP has degree-awarding powers.
GSM London, on the other hand, offered degree courses validated by the University of Plymouth.
However, if BPP is sold, its degree-awarding status would be subject to a review, the outcome of which would not be clear until money changes hands – a potentially daunting prospect in the wake of the collapse of GSM London.
Apollo could not be immediately reached for comment.
Morgan Stanley did not immediately respond to a request for comment.
Date published: 18 November 2019