Mercia hosted a webinar on April 30th detailing their EIS Fund’s performance over the last year, here’s everything you need to know and link to the recording. The Webinar was hosted by Mercia Investment Directors Dr Paul Mattick and Chris Kilroy. If you would like to watch the full webinar and Q&A please follow the link here.
Seeing the results from the 2010’s vintage
Dr Mattick covered Mercia’s EIS investment performance quickly from the outset, revealing strong returns from funds before 2015. EIS funds before April 2015 average 3.2x invested including tax, with 1.9x realised. EIS funds before April 2018 average 2.4x invested including tax, with a 1.1x realised.
The vast majority of investments were in EIS, the aforementioned figures excluded SEIS which makes up approximately 5% of the value of the fund. However this exclusion means recent extremely successful exits are not included in these figures.
Over the last year Mercia’s seen a flurry of exits, notably Clear Review for 8x cost and Agilitas for 8.4x cost. Dr Mattick noted the 2018/19 fund has seen multiple failures, though he expects that year to return well over cost, within the 2x range.
Mercia is a responsible investor
Dr Mattick revealed a new push for Mercia to codify its current ESG and responsible approach to investing. acknowledging the speed at which the financial industry is moving on ESG Mercia is focussing on creating value through ESG. Mattick explained, “It’s important to us a company, as an investor and as board members to these companies.”
The key points of Mercia’s ESG approach they are codifying are continuing regional investment to stimulate regional development, adding value to investors with a focus on governance in ESG, and leveraging their 400 portfolio companies towards sustainable goals. He continued, “It’s integral to what we do and it always has been.”
Kilroy covered the strategy Mercia has implemented to get these results, although sector agnostic Mercia does put a strong emphasis on region, focussing on the Midlands and North of the UK, and Scotland.
Mercia has a large footprint in this area with 8 offices hosting a team of approximately 100 strong and managing 3 regional non-EIS funds. Mercia manages The Midlands Engine proof of concept fund, and the northern powerhouse investment fund, both partnered with British Business Bank. Mercia also manages the North East Value fund along with NE Finance.
Together this operation can source deal-flow and offer co-investment and downstream capital through VCT’s.
Some of the successful exits Mercia has seen with this approach include OXGENE that returned 20x cost.
The regional investment partnerships have helped Mercia to develop a track record of providing follow-on capital to companies that can deliver against their milestone. Kilroy explained through downstream investment Mercia “build ownership in the business as it grows.”
2020 was a strong year for Mercia as they delivered a flurry of impressive exits.
In July 2020 Mercia sold Native Antigen Company to LGC, delivering 8.6x return for the EIS fund. Notably, Mercia first invested all the way back in 2013, showing the maturation of the fund and vindicates their approach.
Mercia sold Clear Review to Advanced in October 2020, returning 8.6x cost of investment for the EIS fund, first investing in 2018.
Mercia’s sale of OXGENE in March 2021 delivered a return of up to 20x across 5 portfolios. A SEIS/EIS investment between 2013 and 2016.
If you would like to see these results in more detail, follow the link to the webinar here.
Exits on the horizon?
Part of the Webinar was open to a Q&A where both Mattick and Kilroy answered the attendee’s questions. The questions were diverse and worth listening to in full, but one question, in particular, is likely to get investors excited, namely, can we expect any exits in the near term?
Dr Mattick explained, “over the next few months we should expect a regular pace of exits going forward.” The overall portfolio is maturing and 2020 proved to galvanize many of Mercia’s holdings.
Mercia will present all the data of the underlying portfolio companies in July, meanwhile, Mercia’s investor center includes all kinds of data including capital invested, capital deployed tax certificates and even a redacted copy of the investment committee paper.
If you would like to watch the full webinar please follow the link here.