e-capital investments, the AIM-listed incubator, has reinvented itself as a private equity company and transferred its investments to a technology realisation fund established with Sigma Technology Management.
Once focused on investing in Internet, e-commerce and new technology companies, e-capital is now planning to invest in European businesses in the consumer brands, leisure, retail and specialist support services sectors. It is looking for public or private companies with assets that are undervalued and will consider a reverse takeover if a suitable single opportunity arises. Richard Kleiner, joint CEO of e-capital, expects deal flow to come from relationships the firm has with US private equity funds looking for opportunities in Europe.
Although a number of potential deals are already being considered e-capital is proceeding cautiously as it feels the economic outlook remains uncertain.
The investment company has simultaneously transferred the management of its portfolio of 14 early stage technology investments to Sigma, supported by an investment of 7.5 per cent of the agreed book value of the holdings. Sigma is seeking additional portfolios for its realisation fund, which aims to relieve investment companies of non-core technology commitments. “We came up with a structure that suited us and which will hopefully be good for others as well,” says Kleiner.
He expects Sigma’s fund to expand quickly: “There has been a lot of talk about the consolidation of the bombed-out technology investment sector and in particular the AIM-listed companies but until now there has not been a credible structure for doing this or a capable management team.”
Sigma advises, procures funding and invests in developing companies, particularly in the TMT sector. Services offered by the team of 20 to 30 people available at the management company include active business and corporate development services. Sigma will manage the portfolios in return for an annual management fee of two per cent and look for exit opportunities, which will also earn Sigma ratcheted carry. Sigma also manages the Sigma Technology Venture Fund, which raised GBP17 million, towards its GBP50 million target, at its first closing in April.
Avanti Partners, the corporate finance business acquired by e-capital in December 2001, will receive GBP100,000 for structuring the agreement as well as a share of Sigma’s fee for managing the portfolio. Avanti, which provides M&A broking and structuring advice, has completed two deals so far this year.