Cinven's successes pave way for private hospital giant in UK

Cinven, the venture capitalist group, is poised to announce the creation of the biggest private hospital group in Britain with the merger of BMI and Amicus Healthcare, two of the many companies in which it has invested heavily. Andrew Yates charts the progress of Cinven and discovers the secret to its success.

Cinven specialises in throwing money behind some of British industry's best management teams. Founded in 1977 as the venture capitalist arm of the Coal Board, it was freed from the shackles of the nationalised institution two years ago when it was bought out by its own management team. Since then Cinven has expanded rapidly to become one of the biggest venture capitalist groups in the UK. Having raised a pounds 1bn venture capital fund last year it is currently raising another pounds 1.5bn to spend on new ventures.

Unlike some other venture capitalists which are seeking a quick buck from their investment, Cinven has a policy of investing in companies for the long term, typically three to five years.

John Brown, Cinven's deputy managing director, said yesterday: "One thing that distinguishes us from our competitors is that we are independent and not owned by a financial services group. Our strategy is to put capital expenditure into companies ... which have often been starved of investment, to help them grow. Our philosophy makes us welcome to many management teams."

Cinven has capitalised on the huge growth in the management buy out and buy in markets, orchestrating pounds 4.9bn worth of deals since 1990 including the pounds 372m management buy out of Dunlop Slazenger from BTR and the pounds 402m deal to spin off Gardner Merchant from Forte.

"There is pressure on large companies to divest of non-core businesses by sales or demergers and that trend will continue. Our rate of return has outperformed the stock market over the last 20 years and we aim to continue that performance," Mr Brown said.

Cinven confirmed yesterday that merger talks between BMI and Amicus Healthcare had reached the advanced stages and a deal was likely to be announced early in the new year. The new group will be the country's biggest private hospital owner, pushing Bupa into second place. It will control 41 hospitals with more than 2,500 beds.

Cinven owns a large stake in both companies and has been instrumental in creating the merger. It bought a majority stake in BMI in July as part of a pounds 1.1bn acquisition from Generale des Eaux, the French utility. The deal was the largest European management buy out this decade. It also backed a pounds 200m management buy out of Amicus in December 1995 when it was spun off from Compass, the caterer.

Analysts believe the merger could create a company valued at well over pounds 1bn. The new group is likely to be floated on the stock market within a few years.

Charles Auld, who currently heads BMI, will become chairman of the new group, however most of the senior management will be made up of Amicus personnel according to industry sources. Analysts rate the Amicus management as some of the best in industry.