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Venture capital firm ‘cautious’ over new investments

Private equity firm 3i is 'cautious' about making new investments while the economic outlook remains uncertain, closing another funding route off for growing businesses.

The problem faced by the firm is not any shortage of businesses or entrepreneurs seeking funding, but planning effective exit routes when the investment has matured and the difficulty in raising funds.

The company is a major investor in dozens of UK brands like nightclub and music producer Ministry of Sound; tool hire firm HSS and Pinewood Film Studios, where the James Bond movies are made.

Until money markets free up and the company can foresee how market sectors are likely to perform, few investments are expected - and the firm made no new acquisitions in the three months to the end of June.

Instead, 3i has concentrated on strengthening the balance sheet by raising almost £700 million by selling shares in a rights offering last month to help cut debt that totalled £1.9 billion in March.

Proceeds from asset sales dropped 46% to £163 in the period.

Chief executive Michael Queen, 47, who replaced Philip Yea as chief executive officer in January and has sold assets and shut divisions as the value of the firm’s holdings dropped. Net debt declined to £961 million at the end of June, 3i said.

“A substantial increase in liquidity and the reduction in net debt provide further resilience in what remains a fragile environment,” Queen said. “Given our view of the general economic outlook we will continue to take a cautious approach to new investment.”

3i advanced 0.75 pence, or 0.3%, to 226.75 pence in London trading yesterday, valuing the firm at about £2.2 billion.

The pace of leveraged buyouts plummeted 75% to £23 billion in the first half of this year as the loans the firms rely on to fund acquisitions dried up.

Queen closed 3i Quoted Private Equity Plc, an investor in smaller publicly traded companies, in February and is also selling stakes in venture capital investments.


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  • Response
    New investment should be executed according to the needs of th emarket place.There are many changes in the market place due to overall financial cricis.But a proper analysis and research can help the people to learn more about how and where they can invest their capital.

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