For-profit growth predicted if US giant buys UK's BPP

Acquisition could spark expansion of private providers, writes Melanie Newman

May 14, 2009

The owner of the largest for-profit university in the US is eyeing a London institution in a move described as highly significant to the future of UK higher education.

The Apollo Group, which owns the University of Phoenix and is backed by a Washington-based private equity firm, has approached the parent company of legal and accountancy education provider BPP, Britain's only for-profit provider with UK degree-awarding powers.

David Willetts, the Conservative Shadow Universities Secretary, said the development could be the shape of things to come. "Potentially this marks a very significant change for British higher education. It will be fascinating if Apollo expands the BPP model," he said.

As a "believer in supply-side reform", Mr Willetts said if the Conservatives came to power next year, they would look to remove barriers to new entrants to the sector.

His comments came as Nigel Thrift, vice-chancellor of the University of Warwick, predicted "more encroachment" by for-profit institutions, in a speech to the Royal Society of Arts on 13 May (see box below).

"Companies like BPP are likely to forge ahead," he predicted. "Certainly, the touch of the private sector will become an increasing reality, at least for low-overhead vocational teaching." He added it was "not impossible" that private companies could take over "discommoded" universities and turn them into "vocational teaching machines".

Anna Fazackerley, head of education at think-tank Policy Exchange, said Apollo's interest was "a reminder that big private education providers are watching the British higher education marketplace very carefully".

Apollo and its private equity partner The Carlyle Group reportedly valued BPP at £303 million in their preliminary approach. Last year, they bought Meritus University in Canada and the private Universidad de Artes, Ciencias y Comunicacion in Chile, and acquired a majority stake in Universidad Latinoamericana, a private university in Mexico.

Perhaps the most significant institution in Apollo's portfolio is the University of Phoenix. With almost 400,000 students, it is the largest for-profit higher education institution in the US. Phoenix has led the way for other for-profit institutions, offering vocational courses taught in after-work classes at roadside campuses or online by part-time "practitioner faculty".

However, the approach has led to claims that it offers low-quality mass programmes, and in 2008 it was found to have misled investors by not disclosing a government report criticising its recruitment practices.

Ms Fazackerley said: "There have been criticisms about the quality of education that is offered, which should not be ignored, but (Phoenix) has achieved extraordinary things when it comes to broadening access."

James Tooley, professor of education policy at Newcastle University, said: "To bring the disciplines of that market-oriented company (Apollo) into higher education in the UK would be a great step forward to creating a competitive market here."

melanie.newman@tsleducation.com

Editor's note

A representative of the Apollo Group has asked us to clarify that Apollo Group, Inc. is not "backed" by The Carlyle Group. "Rather, Apollo and Carlyle are partners in joint venture Apollo Global, which is 80.1 percent owned by Apollo and 19.9 percent owned by Carlyle," a spokesman said. "Apollo Global was formed with the intention of making a range of investments in the international education services sector."

He also said that Apollo did not buy Meritus University in Canada. "Rather, Apollo established the new Canadian institution, which was awarded degree-granting status by the New Brunswick department of Post-Secondary Education, Training and Labour in May 2008."

Times Higher Education reported that "in 2008 [Apollo] was found to have misled investors by not disclosing a government report criticising its recruitment practices". The spokesman points out that the Jury verdict in this case was overturned on August 4, 2008, "when District Court Judge James A. Teilborg ruled in favor of Apollo on its post-trial motion for judgment as a matter of law". The court's order is available at: www.apollolegal.com/securitiesDocuments/Apollo_JMOL_Order_080508.pdf

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