In the second edition of the FT book published this time last year I updated Topic 8 with an article about the UK private equity firm 3i. This acted as a sharp contrast to the Boots case study which was included in the first edition. At that time private equity was going through a boom with a vast amount of deals making the firms and their partners very rich. These days it could hardly be more different. Successful private equity deals rely on the availability of cheap debt finance and a rising stock market. At the moment the availability of borrowed money remains a problem and share prices are at best volatile. Against this background Candover Investments, the private equity group, is attempting to make a serious re-structuring of their business. The FT reports today (page 18) that the firm is seeking to "spin-off" its buy-out arm and sell a third of their investments. These moves will confirm the sad deterioration of the firm which has moved from being a star of this sector to its current very depressed state. The latest announcement from the company reveals that Candover Partners Limited, the buy-out arm, will be sold to Arle Capital Partners which is a new private equity group that has been set up by its own managers. The plan is also sell about £60m of their investments in order to reduce the debt burden. These developments show the continuing problems of the private equity sector. It seems such a long time ago when these firms appeared to be so invincible. In finance times change very fast.
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