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Mark Emmett

When entrepreneurs consider the "challenges of growth", the issue is often about funding, yet an ambitious private business has other needs too. It is interesting to consider how 3i, the world's leading growth investor, creates value by providing more than just capital financing.

Case study 1: Senoble The Business France's third-largest manufacturer of dairy products and fresh desserts, with an annual turnover of €750 million in 2005. Since 1921, the company has been owned by four generations of the Senoble family. 3i's Participation In 2004, 3i invested a significant amount to acquire a minority holding. 3i's Value-add To assist the company's rapid expansion across Europe, 3i identified acquisition targets and introduced a non-executive director with a wealth of industry experience to help the business drive forward its growth plans. Why 3i? "3i showed real motivation to invest and an excellent knowledge of the food and drink sector. It was soon clear they were the most proactive candidate, better able to fit in with our family dimension." Marc Senoble, CEO, Senoble

When initially considered, the private equity proposition appears to be a straightforward one: they invest in your company, while you give them a seat on the board and a share in the equity. Eventually, they sell up. You have had the funding you need and they have made a profit on their investment. It may look simple enough, but it is not the complete picture.

As any ambitious owner-manager knows, achieving significant growth raises many issues besides finding the best financial solution. Entering new markets, acquiring another business or diversifying the business may look enticing but presents challenges, which many striving entrepreneurs may not have experienced before. Your existing suppliers may not be able to meet increased demand. And a bigger business creates the need for tighter control, both in financial management and corporate governance. One way of reducing risks is to seek relevant guidance and support from a specialist in these areas.

A private equity firm that simply offers funding in exchange for an equity holding in the business now looks a bit outdated. When businesses choose to take on a finance partner, they should seek a bit extra - 3i has more to offer than most.

3i has worked with privately owned businesses for more than 60 years, and, as the world's leading growth investor, has invested over €6 billion in growth capital over the last 10 years. Secondly, it has a global network of offices across Europe, Asia and the US, each of which has an in-depth knowledge of local sectors and markets. When your next big order is likely to come from Mumbai, rather than Milan, Lyon or Manchester, it is helpful to have a partner with a strong base in the world's fastest growing economies.

3i's international network of investors acts as an exclusive channel for sharing great ideas. They work as global team, yet they each have a clear focus on specific industry sectors and their local economy. This means an innovation that has worked well in France is quickly available to the companies partnered by 3i across its network.

A key difference between 3i and its rivals is that it is a quoted company on London's FTSE 100. Unlike most private equity firms, 3i's Growth Capital Team invests from its own balance sheet, rather than an investment fund. This enables the company to take a longerterm view, and be more flexible towards exit plans, as it does not have to meet the requirements of a fund that is approaching maturity.

Case study 2: Williams Lea The Business Founded in 1820, this privately owned business is now the leading UK supplier of business process outsourcing in the document and print management market. 3i's Participation 3i has been an investor since 1965, originally with a 13 per cent stake. In 2003, they provided further funding that took their total investment to €64 million but they remained a minority shareholder. 3i's Value-add By devising an innovative funding structure, 3i provided the company with the capital it needed for expansion while allowing a number of family shareholders to release some of the capital. They also helped Williams Lea to successfully structure and execute a €171 million acquisition in the USA. Why 3i? "We needed to strengthen our capital base in anticipation of considerable growth over a five year timeframe. 3i provided a fast, innovative solution that achieved all our aims." Tim Griffiths, CEO, Williams Lea

3i's pedigree helps it stand out from the crowd among private equity firms, but how specifically can it help you, an entrepreneur of an already successful enterprise? 3i invests in established and successful private businesses, looking for companies that have distinct market positions and clear prospects for growth. For growth investments, 3i typically invests from €10 to €150 million in businesses that are worth between €50 million and €1 billion. The funds invested are used to support growth activities. Often this is when businesses are looking for acquisitions or in situations where high levels of borrowing have previously prevented the owners from pursuing the opportunities they can see in the market. Because 3i provides capital, its investment strengthens a balance sheet. And unlike debt, capital does not demand monthly repayments, leaving cash flow free to generate growth. This is not to deny the role of debt in the right circumstances; funding packages can include a debt element - perhaps helping an undergeared company restructure when the business transfers from one generation to the next.

What does 3i look for in a growth investment? Typically it takes a seat on the board and a minority shareholding between 10 and 45 per cent. Its proven approach is centred on partnership and, as a shareholder, its interests are absolutely aligned to yours - growth, sustainable success and profit.

Often, entrepreneurs considering a private equity partner have two key concerns: over-involvement and an investor whose only concern is to make a quick exit at a quick profit, even if it is not in the company's best interests.

At 3i, the interest is in the company's strategic direction. Using its networks of connections, across 3i and externally, it provides counsel that supports growth. This was one factor that persuaded the Senoble family in France to choose 3i as a partner in the business their family has run for more than 80 years (see case study).

3i's investment approach is very much about collaboration when working with a privately owned business. 3i's successful relationship with Williams Lea in the UK blossomed when 3i provided a tailored, innovative financing package to align the interests of stakeholders and support a major acquisition program (see case study).

Looking at the big picture, the blend of flexible funding and strategic support from Europe's leading private equity firm is an enticing one. Many privately owned businesses have already found that it works well for them. If you would like to find out more about 3i Growth Capital, visit www.3i.com or email growth.capital@3i.com

Contact information
Head office
16 Palace Street
London SW1E 5JD
Tel: +44 20 7928 3131
Fax: +44 20 7928 0058
Email: growth.capital@3i.com
Website: www.3i.com

 

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