The College of Law – For Sale

 

LB meets Nigel Savage, the man responsible for turning around the fortunes of the College of Law

Professor Nigel Savage, chief executive of The College of Law (CoL), is eating his second breakfast of the day, Marmite on toast. ‘I’ve got an incredible metabolism,’ he says as he takes the lift up to a third-floor classroom at the CoL’s smart campus in London’s Moorgate. He finishes his toast, and settles in for our interview with a huge cup of tea. Over the course of the hour he stands up, paces the room, puts his feet up on a chair and bangs his hand on the table when he needs to emphasise a point.

But no wonder he’s restless: we’ve caught Savage at a busy time. The CoL is poised to be bought out by Montagu Private Equity for £200m. As part of the deal, the 50-year-old college will convert from a charity into a profit-making business with the funds to match its global ambitions. The proceeds from the sale will be funnelled into a charitable arm called the Legal Education Foundation (LEF), essentially a vast £200m endowment that will hand out around £8m a year in bursaries and schemes for the promotion of legal education in the UK (see boxout, ‘The Montagu deal – Q&A’).

The sale, which will likely close in July, has caused consternation among students and drawn plaudits from those in the legal education sphere. It also has wider implications for the way universities are owned in the UK over the coming years, with universities potentially able to use the unique structure the CoL will adopt to sell stakes in their own businesses. It’s a bold move, but then Savage has never been one to shy away from controversy; he’s been raising hackles in the fusty corners of the profession for 20 odd years and this deal is one of the biggest coups of his career.

LB last profiled Savage in 1995 when he was dean of Nottingham Law School (see ‘Playground battle’, LB53, page 48). We described him as a self-confessed ‘wide boy’ who smoked cigars in his office, used an oversized mobile phone and drove round in a Honda emblazoned with Nottingham Law School’s logo.

The cigars may have gone, but Savage has lost none of his verve. ‘Does it look like I have mellowed?’ he asks, smiling. His peers agree. Various academics interviewed for this piece describe him as ‘gung-ho and aggressive’, ‘not one to take hostages’, and ‘a blunt northerner who is always good for a quote’, while The Times recently called him the ‘entrepreneurial “wild boy” of legal education’. For many, he is exactly like Marmite.

Man with a plan

When LB meets the restless Savage on a drizzly Tuesday in May, he is just about to do a tour of the CoL’s eight campuses across the UK, talking to staff about the upcoming changes that the Montagu deal will bring. ‘It’s like a law firm merger or takeover – it’s quite unsettling for staff,’ he says.

Last year, Savage and the CoL’s nine governors kicked off a strategic review of its business to assess what model it should be using. The biggest sticking point was finding a legal structure that would work around the CoL’s charitable status, but that would also allow for financial growth. The solution was to create a separate profit-making legal education and training business, with the CoL’s governors unanimously agreeing to hive off the CoL’s charitable arm into a separate entity. That paved the way for the profit-making side of the business – including its contractual commitments with law firms, its brand and its degree awarding powers – to be sold to a private bidder. 

Late last year, the CoL invited around 20 organisations to submit initial information about intentions for the business. That long list was whittled down to a nine-strong shortlist of interested companies, including private equity house General Atlantic and education provider Pearson.

‘It gradually emerged that Montagu ticked a lot of boxes,’ says Savage. ‘They came along and tested our strategy and said “we buy into that”

The bidding process took roughly six months. Savage says he had to come back early from a skiing holiday at one point to ink the deal only to find that the documentation was delayed. The CoL turned to longstanding adviser Allen & Overy (A&O) for legal advice during the sale, led by global corporate chair Richard Cranfield. Leading private client boutique Maurice Turnor Gardner, formed by ex-A&O partners, advised on spinning off the charity, while Linklaters advised Montagu, with private equity co-head Richard Youle at the helm. Ashurst corporate partner David Carter also advised the CoL’s management team.

‘It gradually emerged that Montagu ticked a lot of boxes,’ says Savage. ‘They came along and tested our strategy and said “we buy into that”.’

UK-based Montagu has a reputation as a solid mid-market private equity player, and currently has stakes in Biffa, the waste management company and the Jemella Group, which owns hair straightening brand GHD. But Montagu had never made investments in the education sphere before the CoL deal, making it an unusual choice.

‘I was very surprised by the result, as they have shown no interest in the education business in the UK,’ says Glynne Stanfield, a partner in Eversheds’ education group who advised one unnamed bidder for the college.

Savage puts a typically positive spin on Montagu’s lack of experience in the education sector. ‘In some ways it is an advantage that Montagu doesn’t have any experience in education because it is relying on us to grow the business,’ he says. ‘Its view is that nobody knows more about legal and higher education than me and my colleagues. I’ve been knocking around since the year dot and that is what Montagu is buying in some respects.’

Savage grew up in Nottinghamshire and after leaving school at 16 with no qualifications, took on a series of dead-end jobs, including a stint collecting turkey semen for breeders and selling insurance. But he went back into education to pass his O and A-levels, later studying business law at the Manchester College of Commerce. After completing a PhD and serving a period as a lecturer at the University of Strathclyde, Savage joined Nottingham Law School, eventually moving up the ranks to become dean of the law faculty in 1991.

At the time, the CoL had a quasi-monopoly on legal education with close links to the Law Society. But 1993 saw the introduction of the new Legal Practice Course (LPC) and Savage and his team managed to win students round with their mix of top notch professors and commercially minded courses, making Nottingham one of the best law schools in the country at the time.

Savage then became chief executive of the College of Law in 1996. ‘At the time I got into trouble for saying it was like being the manager of Nottingham Forest and then becoming manager of the England side,’ he says.

It was an uphill battle. The CoL was a disparate collection of semi-independent campuses with an ailing brand and even worse customer service. In 2001 the CoL reached its nadir when a consortium of City firms – A&O, Clifford Chance, Freshfields Bruckhaus Deringer, Herbert Smith, Linklaters, Lovells, Norton Rose and Slaughter and May – snubbed the CoL by striking a deal for their trainees to study at BPP Law School and Nottingham Law School instead.

‘The College of Law has a terrific opportunity to create something new. It can put itself in a global position,’ says John Flood, University of Westminster.

‘We were losing business in the City,’ remembers Savage. ‘It was a much greater test of my management skills than Nottingham. It took longer than I thought it would, but we eventually got to a position where we could attack and got back Clifford Chance and Allen & Overy. We have now created a fantastic business.’

Indeed the CoL has had some impressive financial results (see box out, ‘College of Law financial performance’) and now has a turnover of around £75m and links with Linklaters, Clifford Chance, A&O and CMS Cameron McKenna. But its charity status has always sat awkwardly with the business side of things. Savage believes this has held the CoL back, stopping it from achieving its global ambitions and is one of the main reasons that the Montagu deal had to be struck.

‘We want to attract more overseas students to our programmes and look at the emerging global legal service hubs. What is the best business model to do that?’ asks Savage. ‘The whole concept of a charity is that it is made up of trustees and they should be risk averse. Running a business and running a charity in the current context are perhaps incompatible.’

That profit-making drive and eye on the emerging markets has led to City-level pay packets at CoL, with Savage’s take-home pay going up from £270,000 in 2006 to £440,000 in 2009. Although £440,000 may seem steep in the context of a charity, it is comparable with the average PEP of the LB100, which last year stood at £423,000. It has led to particular criticism in the legal press, with website rollonfriday.com naming him ‘Nigel £440k Savage’.

‘All the crap about my salary is [just] a manifestation of the tension of trying to run a business in a charity,’ says Savage. ‘We are not like bloody Oxfam or Shelter. I think that it’s those sorts of issues that meant we had to address our model to separate the business from the charity and cut out all the crap.’

Lasting legacy

The deal does seem to promise a high degree of continuity, with the current seven-strong management team, including Nigel Savage staying in their positions. Montagu has also appointed Sir Tim Wilson, a former vice-chancellor of the University of Hertfordshire as a non-executive director to keep an eye on academic standards.

Broadly speaking, observers have welcomed the deal. ‘The College of Law has a terrific opportunity to create something new. It can put itself in a global position,’ says John Flood an academic at the University of Westminster. 

It has also been well received by some clients of the CoL. ‘I don’t think it will have any detrimental impact on us at all,’ says Simon Pilcher, graduate recruitment partner at CMS Cameron McKenna. ‘In fact it’s a positive thing because there will be more funds available to undertake exciting initiatives. BPP is owned by Apollo, so the concept of the College of Law being a charity is outdated.’

But the deal has not been without its critics (see ‘The Student Perspective,’ opposite). Perhaps unfairly there have been accusations of greed, asset stripping and speculation that Savage will benefit personally.

‘All the crap about my salary is a manifestation of the tension of trying to run a business in a charity,’ says Savage. ‘We are not like bloody Oxfam or Shelter.’

‘I get no bonus for this transaction,’ says Savage. ‘I’ll be TUPE’d down to the business on the same terms and conditions. On completion I will be required to invest in the business.’

As is usual in private equity deals, Savage will have to put some of his own money into the business in return for share options when the deal goes through. This could provide him with a nice windfall when Montagu eventually decides to sell the CoL.

Private equity companies typically chase high returns of around 30-40% on their investment and look to sell their assets within five to ten years of investing. That will mean a tremendous pressure on Savage and the CoL to deliver impressive financial results within a short period.

One worry is that Montagu will hike up fees for domestic students and sell off the CoL’s £65m property portfolio, but that is something that Savage is quick to deny. ‘This is not a bloody fire sale,’ he says. ‘It’s the sale of a very successful business with a huge potential for growth.’

The CoL is expecting to roll out a new undergraduate degree in law this September. However on the whole the domestic market offers limited opportunities for major expansion, making global markets much more interesting.

As Matthew Robb, a consultant at The Parthenon Group points out, Montagu will probably chase growth from international expansion rather than cost cutting or domestic markets. ‘They are looking for growth,’ says Robb. ‘They are not looking to squeeze more from the lemon. They need to grow the business either internationally, through the undergraduate market or through offering other professional services degrees.’

And the CoL is already one step ahead. It announced in May that it had formed a tie up with the Singapore Institute of Legal Education to develop new programmes in the region. The CoL also plans to attract students by expanding its alliance relationships with Beijing’s Renmin University of China Law School, Northwestern University Law School in Chicago and IE Law School in Madrid.

The biggest changes may well come for the CoL’s 800-odd members of staff, with modifications to its pension terms and conditions currently on the cards. One person claiming to work for the CoL posted a comment on RollonFriday in April: ‘Very matter of factly, without one atom of apology, we are told that many of our pension rights are being taken away. And guess who gets the benefit of these cuts? The greed of Savage and his cronies is breathtaking. It is matched only by the brazenness of his “strategic review”, the sole aim of which is to take the assets of a charity and use them to line his own pockets.’

The most recent (2009) full valuation of the CoL’s Defined Benefit Pension Scheme showed a deficit of £12.9m, and, as part of the deal, the pension scheme will be transferred to the new business with ‘broadly similar pension arrangements’ according to Savage.

One of the biggest legacies of the sale will be the LEF, with its £200m endowment and £8m annual spending power, it will have the potential to have a major impact on widening access to the profession.

At present details of what the Foundation will spend its money on are scant. Professor David Yates, chairman of the governors, says: ‘I imagine that the foundation will apply its significant resources to funding grants, bursaries and awards aimed at maintaining and promoting high standards and research in legal education, encouraging innovation in the teaching and learning of the law and improving access, especially from underprivileged groups.’

That will mean more money for existing programmes aimed at opening up access to legal education like Pathways to Law, as well as for the CoL’s think-tank headed up by Professor Stephen Mayson, the Legal Services Institute. But neither Savage nor Yates rule out funding cross-profession wide initiatives, although no concrete plans are in place yet. 

‘The Legal Education Foundation is not just confined to dealing with the College of Law,’ says Savage. ‘I’m very happy as it’s an output from my years of graft here. It could be on my gravestone or monument,’ he adds, only half jokingly.

Back at the CoL’s Moorgate campus, students are beginning to stream out of teaching rooms on their way to lunch. After 20 years in the business, Savage is no longer the pushy outsider he once was.

‘I’ve become more of an establishment figure these days and people are more inclined to listen to me, but that’s just a function of age!’ he says. ‘I’m still excited about the market. I used to be a much more hands-on chief executive and now I’m much more like a senior partner.’

Love him or hate him, the Marmite man of legal education is not putting his feet up any time soon. LB

becky.pritchard@legalease.co.uk