General Electric Co. last month decided to begin winding down operations of GE Equity, the Fairfield, Conn.-based conglomerate’s $3 billion private equity investment group. The closure will occur over the next few years as the group exits its nearly 250 direct and indirect investments, although some of its 135 employees could be receiving pink slips within the month.
GE Equity recorded a $167 million loss in GE’s third-quarter earnings report, but the company says that the shutdown is not a direct result of the private equity industry’s recent downturn. Instead, it seems that GE Equity is a victim of new GE Chairman Jeffrey Immelt’s desire to reduce exposure to volatile asset classes.
“This is a strategic decision made as part of a larger restructuring,” explained David Frail, a spokesman for GE.
The vast majority of GE Equity’s recent investments were direct venture capital deals, mostly in the Internet, telecom and computer software spaces. It also participated in some LBO transactions and acted as a limited partner in certain third-party private equity funds. The group has immediately suspended all investment origination activities, although it will continue to support existing portfolio companies. As for the impending layoffs, Frail could not provide specific dates or numbers, although he did say it was possible that some employees could be reassigned to other investment groups within GE.
It is important to note, however, that the shuttering of GE Equity does not mean that the parent company is leaving the private equity stage altogether. Company spokesmen and sources within the firm say that GE will continue providing debt for leveraged buyout deals, as well as some equity for select pre-M&A transactions. In addition, the Merchant Banking and Corporate Finance Groups (GE Equity was in the Commercial Finance Group) are both still active in making new LP investments.