UK-listed buyout firm 3i has sold its stakes in nine companies to secondaries firm Shackleton Ventures. The move continues the listed group’s attempts to tidy up its portfolio of small and minority investments.
Terms were not disclosed, but a source close to the deal said it was worth about £3 million ($6 million, €5 million) in total.
UK-listed 3i backed most of the nine companies as start-ups in the last 1990s, just before the dotcom bubble burst with disastrous consequences for its venture portfolio. They include payment processing company Creditcall Communications, biotech business EirX Pharma and health business Catatrac, which specialises in organ treatment.
3i has been looking to sell off the legacy minority stakes in its portfolio, as it looks to focus its efforts on new venture investments and the more profitable buyout and growth capital areas of the business.
Hugh Stewart, managing partner of Shackleton Ventures said: “These companies have lived through a very difficult time in the venture markets from the late 90s, and because VCs will want to exit such investments, secondaries deals will be on the increase.” Venture investing has been very difficult in Europe because the return on many investments has often been less than the money would have earned in a building society, he added.
Stewart argued that this is because venture deals in Europe can take ten years to make a profit, as opposed to five years in the US. Because investors do not want to be tied in for this long, “secondary investment will increasingly be half of the equation, as many middling companies can’t be written off over here as they are in the US.” US investors can write off average deals more easily because hugely lucrative ‘home run’ investments – like search engine Google – are much more likely, he said.
However, big gains are clearly possible in the European venture market. Last week, the founders of Index Ventures’ backed Last.fm sold the company to CBS for $280 million ($208 million). Index is reported to have received $56 million for its 20 percent stake.
Shackleton Ventures has bought 16 portfolio companies since it was founded in November 2006, 13 of which have been bought from 3i. Shackleton Ventures’ first fund can draw on up to £20 million and it is backed principally by an undisclosed European-based fund of funds investor with over €1 billion ($1.35 billion) under management.