1bn pounds being raised for buy-outs

BRITAIN'S venture capital industry is raising more than pounds 1bn to fuel a massive buy-out boom over the next few years, writes Neil Thapar.

The money is being raised from UK and overseas institutional investors by a handful of firms for a new generation of management buy-out funds that will invest primarily in British businesses.

The cash call is in stark contrast to the position just two years ago, when venture capitalists shunned the stock market because of a dearth of new investment opportunities.

Charterhouse Development Capital, which is part of the Charterhouse merchant bank, hopes to raise up to pounds 300m by this autumn, while Morgan Grenfell Development Capital - owned by Germany's Deutsche Bank - is tapping investors for pounds 260m.

Other firms setting up new venture capital funds include Candover, which has drummed up more than pounds 200m, while Schroder Venture Partners and Apax Partners have each raised pounds 150m.

One reason for the fund- raising spree is that some firms have run out of cash to continue backing investment opportunities, now coming forward at an increasing rate. Many of the original funds were launched more than five years ago during the last buy-out boom.

However, these funds have since realised most of their investments and returning profits to investors. As a result, the firms are setting up new funds to cope wih an expected wave of buy-outs.

Eric Walters of Schroder said: 'Many firms have simply run out of money and are going back to investors for more.'

Last week Wellcome Trust, the medical charity with a large stake in the Wellcome drugs company, announced plans to allocate pounds 200m to venture capital.

On Wednesday, 3i, Britain's biggest venture capital firm, is expected to announce the offer price for its flotation.