3i shifts to later-stage and buyouts

3i, a London-listed global private equity firm, has made a surprise decision to abandon investment in early-stage businesses in order to focus on later-stage and buyout transactions.

Philip Yea, chief executive of 3i, told the Financial Times that “early-stage has not been an easy place”. He added that there is “more value for us in later-stage companies internationally and that is what we have been doing more and more”.

3i invested just £60m in venture capital in the last quarter of 2007, compared to £208m in buyouts and £245m in growth capital. While the venture allocation was up on previous quarters, the total for the nine months to 31 December 2007 was £125m, down from £153m for the like period of 2006.

In terms of returns, venture provided £30m of realisations for Q4 2007, totalling £141m for the nine months to 31 December 2007, far less than the £830m for buyouts and £358m for growth capital. However, it was significantly up on the venture figure for the comparable period of 2006, which was just £61m.

Yea said that the move was a reflection on what 3i did best, rather than a statement on European venture capital, which has suffered ever since the dotcom crash at the beginning of the century, but had appeared to be improving in the last two years.

The late-stage arm of 3i’s venture capital division will be folded into its growth capital unit.