This decision to sell is in no way related to BARBRI’s performance. BARBRI is the leading bar review course in the United States with over 40 years of experience, strong leadership and quality of service. Our parent company believes, however, that bar preparation no longer fits its long-term strategic vision, which is to provide intelligent information and workflow solutions to professionals.As disclosure, I want to note that I think Bar/Bri is a leach that does a disservice to the legal field. I have little regard for its business and believe that its continual existence is evidence that the bar associations are not doing their job to the best of their abilities (e.g. that the bar exam doesn't test the skills it should). But that's an entry for another day.
To be fair to all parties, Bar/Bri is something of a misfit in Thomson-Reuters. Its existence there is an accident of corporate history. Bar/Bri first merged into Harcourt and then into Thomson-West publishing. This made sense because Thomson-West was the largest legal publisher in the country, providing a broad range of legal information. Acquiring a small, profitable company who published legal books designed to aid bar passage made sense. Furthermore, Thomson Corporation (the parent company of Thomson-West) was one of the world's leading textbook publishers and had an expansive business in standardized testing (through Prometric). So Bar/Bri fit in multiple ways in Thomson-West's overall scheme.
Fast forward to the 2000s. Research of all stripes is moving rapidly online. Thomson Corporation begins acquiring all sorts of online information distillers across a wide range of industries. In 2006, Kenneth Thomson dies and is replaced by son David Thomson. In 2007, Thomson sells its entire textbook publication and standardized testing division, leaving Bar/Bri as an outlier saved only by the fact that it's grouped with West ("Thomson Legal") and not Thomson Learning. In 2008, Thomson acquires Reuters, the 2nd largest news dissemination service in the world. The resulting company was a $30 billion behemoth whose interests is in professional news distribution. Westlaw fits in this mold; comparatively-small Bar/Bri does not. Consequently, from their perspective, it makes sense to sell Bar/Bri as an outlier to their current business interests.
But why NOW? And why announce it publicly?
Even if a company is a misfit, a corporate conglomerate isn't going to sell it unless it's a good time to sell; to do otherwise would be a disservice to shareholders. Furthermore, leaking it to the world that a sale is happening guarantees that no one's going to overpay for it.
It is true that Bar/Bri has increased competition, but they're still the king of Bar preparation services with a rather large moat. Maybe I'm reading too much into it, but my guess is that Thomson-Reuters looks at this being the best time to sell Bar/Bri because they don't see much revenue growth in the business. Even with new law schools being accredited every day, they don't see Bar/Bri being a worthwhile investment to hang on to, when it's the default choice for Bar preparation?
Is there a chance that Thomson-Reuters sees what's going on in the law school world and realizes we may be reaching the end of the line with lawyer saturation? The people at T-R aren't dumb. The reason they're still around in a post-newspaper, post-print world is that they were forerunners in online information. Things like Westlaw and a plethora of science, financial, and healthcare tools.
Anytime anyone with that kind of vision to see where the world was going in 5-10 years does something like offload a subsidiary that by all accounts is profitable and the leading bar review preparation course, one should ask a simple question: what do they see the market looking like in 5-10 years?
Since they apparently don't see the market for Bar/Bri's services being as strong in 5-10 years (or as relatively strong) as they see it now, at least enough to keep it within their legal services family, why might that be? And why would they be so desperate to unload it that they don't care that Bar/Bri went public with the information? What do they know that the people supporting law school don't?
I'm guessing competition from all online bar prep courses like Themis. They're realizing that the whole concept of people coming together to watch a video in a hotel conference room is incredibly stupid.
ReplyDeleteNice analysis of the corporate history. With regard to why now and why announce it publically, I note that their acquision of Reuters in 2008 was huge and it is going to take some time to digest that. This may be their first opportunity to review their holdings after spending the last couple of years putting out fires on the Reuters acquisition. As for public announcement, I just checked and the Thomson site does not include a press release announcing it - neither does the bar/bri site. Reviewing the initial e-mail, the "announced" could have referred to "Thomson announced to Bar/Bri" - rather than announced to the public. After that, it might be a good move to send an e-mail re-assuring your customers in case they hear any rumors. The e-mail could have been better crafted in that it did not specifically identify why the e-mail was being sent.
ReplyDeleteWith regard to the market in the future, now is a great time to sell bar/bri. We are in a huge bubble of people going to law school - which means that we are in a huge bubble of people taking the bar exam. I'm not sure that they are worried about competition, but bar/bri is a mature service. It will make its money, but it's growth is limited by the number of law graduates - and that number is not increasing, and is likely to substantially decrease in about 5 years. From a corporate standpoint, dump it now - there's no growth potential and this is about as good as it is likely to get. Also, cash is kind right now and businesses that generate reliable cash flow are getting good valuations.
That's a good point about freeing up cash, MP. Given their recent history, I'm guessing they probably have a bunch of possible acquisition targets on their radar that they'd rather have than Bar/Bri.
ReplyDeleteAnd you're right that they didn't announce anything publicly - but by sending out the email, that's exactly what Bar/Bri did in effect. I don't know enough how these things work, but I would have thought T-R would have asked to keep it confidential if they didn't want the public to find out that Bar/Bri was on the block.
And don't forget that BarBri is a target of antitrust lawsuits. It's a subject of bad press for the company and they now feel constrained by how much they can charge for it as opposed to simply raising the cost from here into infinity. As you pointed out, since they have a limited market, they're suffering this fate over providing a product to a set based of thousands of customers as opposed to millions of customers world wide. On top of that, Kaplan is now also providing a full bar review service. Barbri probably looked at the product and their bar passage rates and figured that it was a matter of time before future students jump ship for a product of equal service. It only takes a few years of, "I passed without taking BarBri" before even law students catch on that they won't fail if they don't sign up for BarBri as they have been told numerous times.
ReplyDeleteAlso, maybe they're looking at the employment numbers and figure that either law schools will cut enrollment or more people will drop out on their own.
Thomson Reuters also has Law school and West legal education where they provide online education to lawyers. Where do you think that is heading?
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