In an effort to avoid volatility in its earnings, management consulting firm Accenture last week announced plans to sell off its private equity portfolio and quit the venture capital business altogether. The firm blamed a 45% drop in its first quarter profits on big investment losses.
Accenture jumped headlong into venture capital during the bubble period in late 1999, pledging $1 billion to its VC arm, Accenture Technology Ventures, to invest in a variety of emerging technologies. “The goal of the venture program was two-fold: one, to get good returns for the firm and two, work with entrepreneurs pioneering transformative technologies and get in on the ground floor,” says an Accenture spokesman. He says he does not know how much money Accenture Technology Ventures had invested to date, although the VC group’s Web site says it has put more than $300 million to work in over 70 companies.
The firm has decided to withdraw from the venture arena, cut its losses and focus on Accenture’s core consulting business, the spokesman says. “Nothing really went wrong with our venture group. It is just that the market changed,” he adds. “We are not a venture capital firm or an investment bank, and we could use these resources better.”
After taking a $212 million charge on investment losses in the second quarter, the firm’s private equity portfolio is expected to have a net book value of $95 million, of which $43 million is hedged, said the Accenture spokesman. This means the company has already entered into an agreement for a forward sale of a certain portion of its private equity portfolio for $43 million with a buyer the spokesman declined to identify. This forward sale is transferable to whatever group buys Accenture’s venture capital portfolio, he adds.
Accenture has hired an investment bank to advise it on the sale, although the company has not disclosed which bank it has hired. Marketplace rumors finger Credit Suisse First Boston as the advisor, but the investment bank declined to confirm or deny such speculation. As for potential buyers, investment professionals with noteworthy secondary firms such as Venture Capital Fund of America, Lexington Partners and Coller Capital all declined to comment on their potential interest in buying all or part of Accenture’s venture portfolio.
Accenture plans to retain a minority interest in the portfolio once it is sold and the company’s spokesman says he expects the venture group to continue operating in some form. Attempts to reach Accenture Technology Ventures’ investment professionals were unsuccessful.
Contact Alistair Christopher at: Alistair.Christopher@tfn.com