Zurich spins off Gresham to management

Gresham, the venture capital firm, is staging a management buyout from its embattled parent, Zurich Financial Services, to become an independent private equity company.

Five Gresham executives – Paul Marson-Smith, Mike Henebery, Simon Inchley, Ken Lawrence and Paul Thomas – are establishing a limited liability partnership to acquire the business. The £265m in funds Gresham manages for Zurich will be transferred to the new company.

Paul Marson-Smith, the chief executive of Gresham, said the buyout was good news for Zurich and Gresham. The deal fulfils Gresham's desire to manage money for parties outside the Zurich group, and helps Zurich on its quest to filter out non-core businesses.

Zurich – which also owns the insurance companies Allied Dunbar and Eagle Star in the UK – last week announced it was launching a $5bn rescue package, including a $2bn rights issue, to save the company from nose-diving profits. A shake-up is taking place with the loss of 4,500 jobs worldwide. Zurich is offloading assets, selling shares and slashing its dividend to shore up capital.

"This type of deal doesn't happen over night. Discussions have evolved over some time – it is coincidence that the time is now right for Zurich and for Gresham," said Mr Marson Smith who is confident Gresham will succeed as an independent despite the challenging market conditions.

"It is an undeniably challenging market. But the thing that protects private equity firms is the quality of their returns. We have consistently doubled Zurich's money over the past four years," he said

Gresham specialises in providing investment capital for middle market companies through deals of up to £75m. These usually involve management buyouts and buy-ins, as well as financing expansion and acquisition plans. Gresham has earned more than £140m from 45 exits on investments since 1998.