In an organisation that had previously been viewed as somewhat staid, the appointment of Philip Yea as chief executive of London-listed private equity firm 3i in May 2005 was – according to one former employee – a breath of fresh air: “It needed an outsider to come in and brush away the cobwebs”.
The fact that Yea was viewed as an “outsider” was indicative of the conservatism which had previously dictated senior management transitions at 3i. Having only appointed chief executives from within its own ranks, the firm was by its own standards going out on a limb when it lured Yea from rival private equity firm Investcorp.
He brought urgency to the role: favouring buyouts at the expense of venture investment, launching infrastructure and listed private equity activities, and expanding the firm's operations in the US and Asia. All the while, Yea was popular with shareholders – the group returned £2.2 billion to investors via share buy-backs in 2006 and 2007.
Unfortunately, these bold moves didn't appear quite so impressive once the credit crunch had tightened its grip. The payouts suddenly seemed a little excessive and the timing questionable. In addition, 3i's debt levels had been mounting and began to have a highly deleterious effect on the firm's share price. In the year prior to Yea's departure, the value of the shares had tumbled by around three-quarters.
The appointment of new chief executive Michael Queen sees 3i revert to type by appointing an insider to the top job – Queen being a 20-year veteran of the firm who was most recently head of its infrastructure business. One task lying ahead will be to chisel away at the firm's debt burden – a task he has already made progress on through the acquisition of assets belonging to its listed Quoted Private Equity fund, delivering a £110 million net cash inflow.
Despite some media reports to the contrary, the source quoted earlier believes Yea left 3i in good shape. “It's a robust business, which will consolidate and continue to grow. It ain't broke. It's taken a drubbing because the world economy has taken a drubbing.”