Prudential eyes two pounds 300m buyouts

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The Independent Online
PRUDENTIAL, the UK's biggest investor with pounds 67bn under management, is considering backing two management buyouts worth more than pounds 300m each.

Paul Brooks, managing director of Prudential Venture Managers, said one of the buyouts - neither of which he would name - could happen in the spring.

Prudential, which controls more than 3.5 per cent of all shares listed on the Stock Exchange, has also doubled its allocation for small company investment to pounds 500m.

The increase will come from the pounds 2.5bn annual cash flow generated by Prudential's life funds.

Big acquisitions are seen by Prudential as a good source of management buyouts of unwanted parts of companies that are taken over.

The decision to double its venture capital allocation could hit smaller venture capital firms, which are mainly locked into closed-end funds that have a limited life.

Many firms are struggling to raise funds from investors who have become wary of the risks of venture capital after making low returns on investments in the late Eighties. 'I think there is going to be some rationalisation in the marketplace,' Mr Brooks said.

About 40 venture capital firms in the UK are seeking to raise pounds 1bn, but are encountering problems with two traditionally rich sources of funds - Japan and America. 'Japanese investors clearly have problems at home, and the US pension funds are gearing up for economic recovery and are more parochial than UK fund managers,' Mr Brooks said.

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