3i plans over GBP1bn in exits with 'better' 2023 in sight

Borrows said the firm has "a number of projects in train" for its realisation programme and remains "confident" of its ability to realise more than GBP 1bn from its portfolio exits for the next financial year.

"In terms of looking further out, that's really going to be down to market confidence where the Fed tops out in terms of interest rates, and then how people generally feel from a confidence basis," he said. "My suspicion is that the herd will start to turn maybe at the end of Q1 and into Q2, we will see a better environment for both selling things and financing things from that point on. I think we could see a different environment in terms of confidence as we get into the meat of our next financial year," the CEO.

During this financial year, the firm has made three exits generating proceeds of GBP 1bn via the sale of consumer pharma group Havea, medical devices specialist QSR and data management software firm Magnitude.

3i generated money multiples ranging from 2.5x to 3.1x for the three sales, which were conducted during difficult market conditions including at the depth of the COVID crisis or Russia's invasion of Ukraine, he said.

Portfolio management
For Action, the European discount retailer now valued at GBP 8.6bn and which has grown to become its largest investment, 3i expects most of its LPs to continue its investment as it approaches its fourth year as part of a continuation vehicle.

"[Our] recent soundings of [the existing] LPs have indicated that this is probably the best investment they made over the last two or three years in most cases, and they're not looking to sell their stakes," he said.

Meanwhile, 3i has been "very active" during the summer, with a focus on bolt-ons, while being selective on new platform opportunities, he said.

"To be completely frank, the market has gone very quiet, particularly in Europe with difficult financing markets," he said. "We would like to see more activity, but it's quite limited in terms of opportunity at the moment."

The private equity team deployed GBP 292m in four new investments and five portfolio bolt-on acquisitions during the reporting period. Among its latest investments include a GBP 100m investment in xSuite, an accounts payable process automation specialist focused on the SAP ecosystem.

During the six months to September reporting period, 3i's private equity business delivered a gross investment return of GBP 1.97bn or 16%, down from GBP 2.37bn and 27% year-on-year, according to a statement. Some of its companies have seen deterioration in performance as a result of cost pressures and reduced demand. it said.

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