London-based investment firm 3i Group will close its Dublin office. 3i said in a statement released last week, “The reason is due to slower than expected development of the Irish private equity market, which has been impacted by the general economic slowdown.”
Clive Austin, head of 3i’s Irish operations, says that things weren’t great in Ireland, but they also weren’t so bad. “3i has completed a number of investments to date in Ireland and believes that further opportunities may arise in the future as the local private equity market develops. However, in the near-term we do not see sufficient activity to support a dedicated local presence. It’s an issue of not enough happening in the market. That’s really the hub of our decision.”
Austin expects the private equity market to pick up in Ireland when the economy stabilizes.
The Dublin office is currently working on a deal in a support services company and expects that the office will shut down after the deal closes and other administrative issues are settled at the end of May. Since its inception in 2001, 3i’s Dublin office invested in Giraffe Childcare, which operates custom designed childcare facilities, and Newcourt, an outsourcing service provider.
The Dublin office, which opened in July 2001 with a staff of four, currently employs Austin and one other employee, whose future has yet to be determined. Austin will work out of 3i’s London office.
This won’t be the first office that 3i has shuttered. After opening the six-person 3i Asia Pacific Japan Ltd. office in Tokyo in July 1999, 3i Group closed it in February (see PE Week; Feb. 24, 2003). Any further Japanese investments will be made through 3i’s Hong Kong division, which oversees Chinese and Korean investments.
However, Austin assures that the closing of the Ireland office was based on his recommendation and not on any company-wide policy or scaling-down effort. “The decision to close down the office was made purely on my analysis locally. It was purely a local decision based on local market conditions,” says Austin.
Founded in1945, 3i has approximately 900 employees in 34 offices worldwide. It’s not surprising that 3i has been forced to close offices, the 3i Group announced recently that it expects the value of its portfolio to drop by approximately $565 million, citing a decrease in the value of its technology investments. This is twice the loss it took last year. But it also said that it expects to have a first close on its pan-European fund for mid-market management buyouts by May 15.
Between 1999 and 2003, 3i closed 42 buyouts in the United States and 583 buyouts in Europe, according to Venture Economics (PE Week’s publisher). Ireland saw $647.8 million invested in private equity deals in 2002. 3i says it wants its investments in continental Europe to make up 30% of its portfolio and the United States to make up 10% of its portfolio. Additionally, it wants its Asian investments to comprise 5% of its portfolio by 2006 with most of the remainder invested in the United Kingdom.
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