Aug. 21--Private-equity house Candover announced a major management shake-up today as its slashes its workforce.

John Arney, formerly of 4i and JPMorgan, becomes the new managing partner in charge of all investments while Colin Buffin, the original driving force behind the firm, is set to step down.

By the end of next month Candover's workforce will have shrunk from 102 at the start of this year to just 41, with senior managers out and fledgling operations in the Far East and eastern Europe closed.

"That is a pretty dramatic indicator of what the private-equity world has been through recently and where it is now," said Candover Investments chairman Gerry Grimstone, who has been battling for the past 12 months to restore the reputation and financial stability of the firm.

"In the last six months we have made significant progress in achieving financial stability partly by realising some investments and by cutting our cost base," said Grimstone.

While the fund's net asset value fell 12 percent to 902p a share in the six months to June, if the one-off redundancy costs and effects of the falling pound against the euro and dollar are ignored, assets rose by 8 percent.

Grimstone said that now was not the time for Candover to cut and run from its investments.

He said: "Traditionally private-equity firms make the most money in the years immediately following a recession. But in the meantime they have to nurse their portfolio companies through the challenging economic climate and ensure they have the resources and expertise to trade through the downturn and take advantage of opportunities when they come out the other side." Within the next few weeks Grimstone expects to have resolved the two outstanding headaches at Candover.

These are the 2008 fund, where Candover Investments withdrew its funding commitments leaving the fund suspended in April, and Candover Partners, the investment managers who are 100 percent owned by Candover Investments but also act for hundreds of other investment funds who invest alongside Candover.

Grimstone said the recent financial crisis had exposed the fact that there could be conflicts of interest between his shareholders and other investors in Candover funds.

The obvious way to resolve this is to separate Partners, probably through some kind of management buyout, which would then allow outside investors to resume investment in Candover 2008 and leaving the listed Candover Investments to return to private-equity investing at some date in the future.

Grimstone said there was no deadline for either issue to be resolved, adding: "We are the first of the major private-equity businesses to have restructured and put management succession in place."

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