Fund to aid public sector buyouts

A pounds 100m FUND, coordinated by Capita Corporate Finance, has been created to invest in management buyouts in the public sector.

The joint venture, which involves three venture capital groups, Electra Kingsway, Schroder Venture Advisers and ECI Ventures, is seeking opportunities from the increasing number of small-scale privatisations, particularly agencies like the Land Registry and HMSO created from government departments. The fund will also consider supporting buyouts by British Rail managers and those seeking franchises and from London and municipal bus companies.

Clive Ward, managing director of Capital Corporate Finance, said: 'The policy of creating agencies will lead to a lot of privatisation opportunities. Under the Citizen's Charter, after three years the Government will be looking at each agency and asking whether government should retain that role.'

He said the pounds 100m was only an appetiser. 'Some of these MBOs may use all that in one go,' he went on. 'I'm sure our three partners will not turn down good opportunities just because the initial money has been used up. '

Capita itself was a result of a management buyout from Cipfa, the local authority accounting organisation, in the mid-1980s and has advised on a number of local authority buyouts.

Mr Ward said the best chances for success with such buyouts were when new markets have been ignored because the organisation has been in the public sector. 'The MBO can expand,' he said. However, he conceded that 'it may be difficult to see where the potential for growth lies with BR franchises'.