Bahraini investment group Investcorp has agreed to buy British private equity firm 3i Group's debt management business (3iDM) for £222m.

The transaction will add $12bn of assets to Investcorp’s portfolio, boosting its total assets under management to about $23bn.

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The acquisition, which is the largest ever by Investcorp, will be fully financed through the company’s balance sheet.

The deal is expected to be wrapped up in the first half of 2017, subject to regulatory approvals.

Investcorp co-CEO Rishi Kapoor said: "This is an exciting moment for us – we see this as a value-added transaction for all sides which will be accretive for Investcorp from day one. Under 3i's ownership, the 3iDM team has created a compelling alternative credit investment business which has seen assets under management more than double in the past five years.  

“We see this business as one of the central pillars of Investcorp's product platform going forward and are absolutely committed to continuing to grow the business on multiple fronts including fundraising, product development and capital support." 

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3i set up the debt management business in 2011 after acquiring Mizuho Investment Management. The firm manages funds that mainly invest in senior secured corporate debt issued by mid and large-cap corporates in Western Europe and the US, and employs nearly 50 staff in London, New York and Singapore.

The existing management team of 3iDM will be retained after the takeover. Jeremy Ghose will continue to serve as the CEO of the combined entity, while John Fraser will continue to manage the US operations.