Anglo-Dutch consumer goods giant Unilever is allocating EURO170 million to a corporate venturing initiative. With three different funds, the group aims to build business opportunities close to its core interests in foods, home and personal care.
For the largest of its three ventures, Unilever has taken the position as sponsor and lead investor committing EURO100 million to Langholm Capital Partners Fund, which has just announced a first closing at EURO225 million. Rabobank International, also a specialist in the global food and consumer goods sectors, has committed EURO75 million to Langholm and is the co-sponsor.
The fund will focus on acquiring majority or influential minority stakes in UK and continental European companies valued at between EURO20 million and EURO200 million. The fund is hoping to raise a further EURO75 million to EURO100 million.
Unilever is also developing two independent venture funds of its own: Unilever Ventures, which will act as an early stage business development fund supporting early stage business ideas; and Unilever Technology Ventures, based in California. The latter will identify and invest in technology-based funds and start-up companies primarily in the US.
Unilever chairman Niall FitzGerald described the development as an exciting and challenging initiative for the group. “We have identified substantial long-term growth opportunities in areas adjacent to our businesses, but recognised we need specialist expertise in developing their full potential.”
Unilever Ventures will invest up to EURO40 million over three years. The initiative is being headed by CEO of Unilever Corporate Ventures, Iain Ferguson, who is also vice president of Unilever corporate development and a chairman of Unilever Ventures advisory board. The venture combines Unilever expertise with venture capital experience. From the Unilever side is managing director John Coombs, former marketing director of Van den Bergh Foods, and Andrew Lane, former marketing director of Unilever’s industrial business.
Both Coombs and Lane are investment committee members. The team also has the benefits of three key outsiders. Mark Muth is a director and investment committee member with 20 years experience in banking and investments. Most recently he was a managing director at GE Equity. Jamie Kennell is an investment director on the team and boasts five years experience with 3i, where he latterly focused on large management and industrial buyouts. Finally Brendan Stewart is a principal and was previously with Ernst & Young’s corporate finance business accelerator unit.
As far as deal flow is concerned the group will look at opportunities with proven business models from both within and outside Unilever with strategies that are close to Unilever’s core business interests of food and personal care. The fund will focus mainly on opportunities in Europe, but will also consider North America and other international markets.
The group has stressed that the venture is not an incubator model. There are elements of incubation such as advice on business strategy, but the fund will only invest in businesses where the model is already proven and management in place.
A typical cash investment would range from between EURO200,000 to EURO3 million over the life of the investment. Already within Unilever Ventures portfolio are projects developed by Unilever managers. An example is Rocket, which produces and sells chilled meal kits of fresh ingredients to make high quality, easy-to-cook evening meals sold to busy commuters on their way home from work in the evening. The venture has been running for two years already and has now been brought into the Unilever Ventures fold to develop it further. The group is in discussions with outside investors for further funding and as other investors are secured, Unilever will look to reduce its holding in the company.
The remaining EURO30 million allocation for venture capital will be ploughed into Unilever Technology Ventures, which is headed by Raja Gopal former head of technology licencing at Unilever. The venture’s main focus will be on US activities, but it will also be amenable to ideas in Europe.
Corporate venturing in the UK benefited from a new service earlier this year set up by the National Business Angels Network. This organisation is supported by the Department of Trade and Industry and sponsored by Barclays, HSBC, Lloyds TSB, NatWest, Royal Bank of Scotland and the London Stock Exchange see evcj July 2002. The aim of Corporate Venturing UK is to connect new and developing businesses with larger companies that are interested in forming mutually beneficial partnerships. It will provide a screening and introductory service.
Nick Cox, director of Corporate Venturing UK, said: “Corporate venturing has a key role to play in the rapid development and exploitation of new business ideas and technology. I am keen to encourage wider participation across British business and am looking forward to co-operating with all those involved.”