FT Report: 3i Group to Cut Jobs

I would hate to think Controlled Greed could ever be a "contrary indicator." But sometimes I wonder. It wasn't all that long ago I linked to a story about 3i Group (III/LN) holding up well during the downturn.

Well, it feels like that was the moment things started going south. As far as the stock price goes (I still like the company over the long term).

But the company still must take steps it would rather not take, according to a report in the Financial Times:

3i will on Thursday announce plans to cut about 15 per cent of its workforce in one of the starkest illustrations of how private equity groups are slashing costs to prepare for a sharp downturn in their industry.

The UK’s biggest listed private equity group will cut about 100 of its 660 staff, with half the job losses affecting its UK operations, as it trims back-office functions, including marketing and human resources.

3i is viewed as one of the more defensive groups because of its strong mid-market focus and wide geographic diversification.

The credit crunch has deprived private equity groups of the cheap and readily available bank debt they had been using to finance deals, leaving many of them with teams of well-paid dealmakers twiddling their thumbs.

The financial turmoil has also made it much tougher for private equity to raise new funds from investors regularly, squeezing their ability to generate fresh streams of fees and forcing them to cut overheads in response.

I could always suffer a big surprise (wouldn't be the first time). But I believe 3i Group and Capital Southwest (CSWC/NASDAQ) -- both private equity plays -- are screaming bargains here.