At its annual results meeting 3i Plc announced new investments up 8% to UKP581m from last year’s figures, a fraction of which (UKP9.6m) went to the computer services sector. The company’s chief executive David Marlow took time in his speech to stress how important start-ups were to 3i, saying that over the past 10 years […]
At its annual results meeting 3i Plc announced new investments up 8% to UKP581m from last year’s figures, a fraction of which (UKP9.6m) went to the computer services sector. The company’s chief executive David Marlow took time in his speech to stress how important start-ups were to 3i, saying that over the past 10 years during which it has been marketing the concept of management buyouts it has backed 900 such start-ups. It has also supported 42 management buy-ins – where a new management team buys into a flagging company – over the past year, and is looking for a market increase in this sector this year. Another strong feature in the address was 3i’s penetration of the continental market, where it currently has a portfolio of 62 investments in France, an office in Frankfurt, and soon-to-be-opened premises in Strasbourg, Lyon, Madrid and Milan. As far as investment trends in high technology companies go, Marlow said the electronics market was flat and venture capital was finding biotechnology and healthcare companies a more lucrative proposition. That said 3i has backed 47 projects in the computer services sector in the past year – half of which were start-ups, and half of which were growth projects. Notably 3i classifies a start-up as a business less than three years old, and declined to comment on the percentage of complete start-ups as opposed to management buyouts it has backed. However, 3i director David Thorp was at pains to encourage management teams working within the bigger computer companies to come to 3i with a management start-up proposal and help get a healthy UK computer industry going. Alistair McNeill, 3i industrial advisor specialising in the computer services sector, was also keen to encourage this type of start-up, particularly in the niche software markets, computer aided design and manufacture, and hardware services. The only way he could see the UK getting its computer industry in any shape to take on US companies was via the Single European Market, where companies would have a fighting chance against the US and Japanese in terms of manufacturing economies of scale. Consequently, it will increasingly become the case that start-ups will have to demonstrate proficiency in European languages and a commitment to continental offices and sites before venture capital trickles in. Regarding 3i’s own possible flotation, that is in the hands of its shareholders, the big UK clearing banks, and at UKP1,700m shareholders’ funds are more than double their level four years ago with 3i’s equity portfolio valued at UKP1,100m.