Investor, Sweden’s largest holding company, has bought 90 per cent of Swiss-based industrial, energy and automation company, ABB’s stake in b-business partners. b-business partners is a venture capital company set up in March 2000 to invest in early stage business-to-business technologies. b-business partners has shifted its investment focus away from seed stage companies and announced it will temporarily return money to investors.
Investor initiated the b-business partners vehicle and said its latest move is in line with a strategy to strengthen its position in the European venture capital market. Investor now holds 75 per cent of b-business partners, representing a e550 million commitment. ABB sold the majority of its share in b-business partners to generate cash and concentrate on its core power and automation businesses. The company received e188 million for its stake in b-business partners.
Hans-Dieter Koch said this move will not represent a big change for b-business partners and does not think the company will be seen as less independent as a result. “It’s critical for us to be seen as independent. It was Investor’s vision to set up an independent VC, why would they want to destroy this idea? It would not be in their interest.” He added that if necessary Investor would be prepared to buy out other shareholders but none of them were looking to leave the company. ABB will lose one of its two seats on the b-business partners’ board but that will not go to Investor. Portfolio companies will still have access to ABB’s technology and the expertise of its employees.
Having invested e300 million each, Investor and ABB were the joint largest contributors to b-business partners. It secured commitments from a group of industrial investors including AstraZeneca, Atlas Copco, Electrolux, Ericsson, Hewlett-Packard, Saab, Sandvik, SEB, SKF, Stora Enso and WM-data. SEB is now the second largest shareholder in the company.
b-business partners also announced it was temporarily returning money, which it had drawn-down earlier, to investors. The firm realised it could meet investment objectives using less capital than anticipated. This was attributed to the lower valuations of companies and the fact that they now needed less cash to carry out their business plans. After this transaction the firm will have drawn down e270 million, out of an available e728 million, e60 million of which has been invested in ten companies.
The firm will now concentrate on early stage and later (but not late stage) investments. “We have left the seed investing market because we don’t see that we can deploy our money in an appropriate time making those type of investments,” said Koch. Rather than committing $2 million to $10 million per company b-business partners now aims to invest between $5 million and $25 million in corporate spin-offs and companies which are two or three years old. The sector focus remains business-to-business technologies, particularly business process integration, wireless business solutions, high bandwidth technologies and security.
b-business partners has not made a new investment since June when it participated in a e12 million round for German company, Healy Hudson, which develops Internet-based procurement software. Koch believes it is better to wait in the current environment of falling valuations: “Every day you wait you get richer.” He expects to complete several new financings in the first half of 2002.