3i, the venture capital firm, yesterday said completing deals had been difficult so far this year as a grim global economy and global political upheaval delayed decision making by companies.
The company, which specialises in funding management buyouts, start-ups and investing in technology businesses, predicted that as a result of extra caution in the market, its total level of investment in the six months to the end of September would be lower than the same time last year. "Investment completions have been low for 3i and the market generally. We believe this is because macroeconomic and political uncertainty earlier this year resulted in decisions being deferred," Brian Larcombe, chief executive of 3i, said. 3i's shares fell 17.5p to 578.5p.
However, the picture looked brighter for the second half of its financial year with companies showing more willingness for signing off deals such as buyouts, Mr Larcombe said in a statement ahead of 3i's annual general meeting.
3i said it was launching a €500m convertible bond, with a view to using the proceeds to refinance existing debt and add to the cash available to make investments. Patrick Dunne, head of investor relations, said: "We don't need the money but this seemed a good opportunity to raise the money because we want to increase our level of investment and this gives us extra fire power." 3i said its bond would carry a cash coupon of less than 1.5 per cent a year, with shareholders expected to see the value of their investment increase by 45 per cent when they convert their bonds into 3i shares.
Buyouts by management teams are showing the most signs of life, Mr Dunne said. "There are lots of frustrated divisional CEOs in larger groups whose careers have been constrained by the difficult markets of the past two years. This is coinciding with corporates feeling more comfortable again with the capital markets, making the buyout market particularly active," Mr Dunne said.
3i pointed to a deal agreed last week - its purchase as part of a consortium of Gant, the preppy clothing retailer - as evidence of more activity in the market. Gant was valued at £67m under the terms of the deal. The consortium also included the US clothing group Phillips-Van Heusen Corporation, an LVMH-backed equity fund and three Swedish entrepreneurs.
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