James Moore: Fate of 3i is a lesson for future government

Outlook The wolves are circling around 3i in the form of corporate raider Edward Bramson and his City pals. It should make for an entertaining spat.

Mr Bramson is an unusual operator. He takes minority stakes in struggling companies, canvasses support among unhappy institutional shareholders and gets himself voted in as executive chairman so he can run them.

It's takeover by stealth, and worked very well for him at F&C Management, the fund manager. 3i will be a rather tougher nut to crack, but given F&C's share price performance since Mr Bramson took control, you wouldn't bet against the City lining up behind him.

Should we care? In one respect, yes. With F&C, Mr Bramson drove a coach and horses through what is considered best practice when it comes to corporate governance.

Sure he got results, but there are plenty of companies that will take note of the way the City allowed it to happen. They'll be saying: "Well if he did it, why shouldn't we?"

When it comes to 3i as an institution, not so much. The company was set up under the auspices of the Bank of England after the war to provide financing to small and medium-sized enterprises (SMEs). You know, the ones which ministers keep saying we need to pull us out of a recession that just refuses to go away.

But instead of sticking to that, and making a return from it, 3i got terribly excited at the prospect of being a sort of British KKR or Blackstone, when they were busily buying up quoted companies on the cheap, loading them up with debt, and then making a fortune by floating them again.

Unfortunately, it didn't work so well for 3i "the acceptable face of private equity". The shares have been dogs ever since.

So no, it really doesn't matter all that much what happens to it.

But there is a lesson here for a future government which is eyeing a privatisation of the proposed state-investment bank aimed at SMEs if (and it's a big if) it proves successful.