E-Capital sheds incubation to pursue PE model

E-Capital Investments is to transfer its technology portfolio to Sigma Technologies as the former internet incubator looks to establish itself as a private equity investor.

TMT investor Sigma Technology has reached agreement with UK-listed internet incubator E-Capital investments to establish a limited partnership fund which will aim to offer investment companies the chance to divest themselves of non-core technology investment portfolios.

As part of the agreement, E-Capital, the AIM-listed company that set out to invest in technology companies, will become a cornerstone investor in Sigma, transfering its entire investment portfolio into the partnership, supported by a cash investment of 7.5 per cent of the agreed transfer value. The transfer value for the firm’s portfolio has not been disclosed but E-Capital’s annual results for the year to 30 June 2001 showed a portfolio of 31 investments with a value of £2.9m against an original cost of £12.4m.

Sigma, who will act as the manager of the fund, is seeking additional portfolios to be integrated into the partnership. According to Neil Crabb, joint managing director of Sigma, the fund will provide investors with an opportunity to rationalise their legacy portfolios. “We hope that our pro-active approach can help create value for investors at the same time as an opportunity for them to divest.”

Julian Fellerman, joint CEO of E-Capital Investments, said 'The new initiative will allow us and other portfolio owners to step back from the day to day running of our legacy investment portfolio, whilst retaining the benefits from realisations in the future.'

For E-Capital Investments, the agreement is part of the firm’s planned transformation from from an early stage technology investor to a private equity business following the reverse takeover of Avanti Capital late last year. The firm aims to target European businesses or management teams which show potential for material growth in the short to medium term including consumer brands, leisure, retail and specialist support services.

According to a company spokesman, E-Capital Investments has up to £18m to invest across smaller companies in the UK and Europe and has already struck agreements with a number of large private equity firms in the US and Europe. “We will act more in the way of a business angel, investing in companies that show good potential. There are some fantastic opportunities at present and we are already well underway with our first investment.” He added that the company will seek to raise debt finance to part fund any investments.

In April Sigma Technology held a first closing of its Sigma Technology Venture Fund after raising £17m from investors. The fund’s principal investors are Scottish Widows Investment Partnership and £2m from Sigma itself, adding to a £7.5m anchor investment made by Bank of Scotland. The fund will be investing in UK-based technology companies predominantly in the TMT sector to exploit opportunities in companies with high-growth potential.