Investcorp Q&A: Why we bought 3i's debt business

Investcorp's Mohammed Al Ardhi

Investcorp

Investcorp’s Mohammed Al Ardhi

Investcorp, which has backed Western brands such as Tiffany, and Gucci over the years, has paid £222 million for 3i‘s debt management business, which is led by Jeremy Ghose and whose addition will more than double the size of Bahrain-based Investcorp’s assets.

Investcorp executive chairman Mohammed Al Ardhi and co-chief executive Rishi Kapoor spoke to FN about why they have done the deal.

FN: Can you talk us through why Investcorp has bought this business from 3i?

Mohammed Al Ardhi: Last year, we announced our vision of reaching $ 25 billion under management in the medium term. We were looking at a timescale of five to seven years. We needed to diversify our product [offering] and our investor base, including better distribution for our products globally.

In July, we announced Mubadala acquiring 20% of Investcorp shares. This increased our partners and strengthened our business. It gave us extra capital as well, to spend on deals like this. It opened up a lot of doors because they are a global investment company, with partnerships with companies such as GE. This means they understand our vision.

The acquisition of this debt management business is really in the same line. We add $ 12 billion of assets under management, taking it to $ 23 billion. We get a new product that our investors and clients are looking forward to accessing. And we get 50 talented people from a business that has been doing very well, and has doubled its assets under management in the past five years.

FN: Are there benefits to be had from putting the firms’ salesforces together?

Al Ardhi: I think the synergy that we have is in the distribution of products. It complements our existing business and vice-versa – by opening up the debt management business to our clients in the Gulf, the US and Europe, and opening up the clients and contacts that this business has in North America, Europe and Asia, to the other products that we have in Investcorp: private equity, real estate and alternative investment solutions.

Rishi Kapoor: The 3i business does have a very well-diversified pool of investors across the globe. But they weren’t under the 3i umbrella and they didn’t really have a distribution platform. One attractive feature for this is Investcorp being able to leverage its distribution salesforce and platform to put them at the service of our clients. They get access to our salesforce which is largely focused on the Gulf and the US, and vice-versa.

FN: Does the deal diversify Investcorp’s business by investment exposure in a big way?

Kapoor: There are some similarities in the DNA for sure. One key similarity is that, just like Investcorp, their investment activities are focused on the transatlantic connection between the US and Europe.

Their DNA is in leveraged loans and leveraged buyouts, and right from the beginning Investcorp has been a mid-market firm. [But] the debt-management business has focused on senior secured lending within the large-cap space. Their focused segment is the much bigger companies, relative to Investcorp.

FN: And the deal must be aimed at tapping what certainly seems to be a growing appetite among institutional investors for private-debt investments?

Kapoor: Yes absolutely. The 3i business has established a well-diversified platform, covering a multitude of credit opportunities, from CLO funds to more traditional channels. They have supplemented this through open-ended funds, US focused funds and direct mid-market funds as well. Given this well-diversified platform, it provides us with the ideal launch-pad to continue to target the private debt segment.

FN: And will you consider further acquisitions in this area?

Kapoor: Some of the growth, as before, is bound to be organic growth because the opportunity set is rich, but we are also open-minded on further acquisitions to build the business.

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