3i to close Hong Kong, Shanghai offices to reduce costs
3i has announced plans to axe more than 160 staff and close six offices, including those in Hong Kong and Shanghai, in a move to bring its capacity down to a more realistic level. The massive job cutting program is expected to reduce 3i’s annual operating costs by GBP45 million ($62 million) within two years.
The job cuts, which represent one-third of 3i's total headcount, are to start immediately, with the majority of affected employees leaving by the end of September. The private equity firm will close its offices in Hong Kong, Shanghai, Barcelona, Birmingham, Copenhagen and Milan, reducing the total number of offices from 19 to 13.
A significant reduction of staff will also be executed at another six offices, including Mumbai and New York.
New chief executive Simon Borrows, a former Greenhill banker who replaced Michael Green recently, said the private equity firm will stop investing in southern Europe and Asia to focus more on northern European markets and Brazil.
Borrows argued that China has become a pretty unattractive market in competitive terms and the stiff competition from other private equity players in Asia means the higher cost of expansion is not worthwhile.
The group has not made a new investment in China for four years, despite its portfolio companies in the country having performed well. Earlier in May, it also dropped the plan to raise a dedicated fund aimed at purchasing stakes in India-listed companies.
"We will re-focus the group's resources and capital in the regions and sectors where we have demonstrable competitive advantage and see the greatest opportunity," said Borrows, adding that the cost reduction program is also about removing complexity from the organizational structure and changing the focus of the firm onto lower volume, higher value-driven business.
3i's troubles can be traced back to the time when it paid highly for companies during the peak of the buyout market in developed regions and declining European markets.
Michael Green, former CEO, was responsible for reducing 3i's escalating debt but failed to save the company from performing poorly. Borrows' appointment in May was expected to bring about a reversal to the company's declining share price.
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