3i’s new shape

The UK’s longest-running private equity investor is merging its two private equity departments, reshuffling management and preparing a move into the debt market.

3i Group announced in September that it will be merging its buyout and growth capital divisions into one consolidated private equity division. This will mean that 3i will now have two distinct business lines: infrastructure and private equity.

Chief executive officer Michael Queen said that the move to consolidate into one private equity division was the logical step given 3i’s regional strength and focus, as well as the fact that both teams had already been working together closely for some time.

“It appears that the growth capital business, where returns have been somewhat disappointing in our view, is being given a sharper focus,” said Iain Scouller, a London-based analyst at Oriel Securities, in a note to clients.

Leadership of the private equity business will be shared between four managing partners with different geographical remits. Guy Zarzavatdjian, formerly head of growth capital, will take charge of France, Spain and Italy. Bob Stefanowski will continue to head up North America and Asia, Alan Giddins will run UK private equity and BeNeLux head Menno Antal will see his remit extended to include Germany and the Nordic region.

The restructuring sees the departure of veteran of 24 years and head of buyouts for 11 years, Jonathan Russell. Russell had been part of the firm’s management committee since 1999 and also spent a year as chairman of the European Private Equity and Venture Capital Association. His exit in October will trigger a “key man” clause, meaning 3i will now have to consult with LPs on its current €5 billion fund for a period of six months.

“Although we have viewed Jonathan as a key member of the business, we should keep this in context, given 3i retains a team of around 90 investment executives,” said Scouller.

Russell’s departure follows that of the firm’s head of buyouts for Asia earlier this summer. David Osborne, who had been with the firm for 25 years, left the Singapore office to join infrastructure investment business CapAsia. At the time the firm said its Asian operations were predominantly focused on growth capital rather than buyouts.

The firm also revealed it is exploring the possibility of adding a third product line, a separate debt management business. As of the end of March, the firm had invested €130 million in non-3i-related leveraged loans and has a further €195 million of a facility from Lloyds Banking Group to invest.