Speaking to Proactive, Dr Mark Payton said the specialist asset manager has “a suite of funds” including EIS, venture capital trusts and institutional capital across venture, private equity and debt on a regional and national basis. Crucially, he adds, this means Mercia can match “the right form of capital, at the right time, to the right investment.”
The company has seen considerable expansion since it began, Payton said, with Mercia starting with £4million of assets under management (AuM), which rose to £30million at its 2014 AIM IPO and has “rapidly grown since then” to around £800million.
Payton added that the company is now profitable and cash generative, well ahead of its target, adding that the firm has “an ambition” to move towards dividend payments and ‘evergreen’ its balance sheet without the need for a further public market fund raise.
Looking to the UK’s regions, Payton said capital “generally doesn't travel outside the M25”, so the company’s model aims to attract money into the regions. Payton added that Mercia’s “strong UK network and track-record” also means the firm is well equipped to support businesses with more than just capital, using its “expertise and resources” to support them as a” trusted partner” as they scale-up in the regions.
For shareholders, one attraction of Mercia’s own business model is that around 80% of Mercia’s revenue is contracted recurring, meaning it can estimate future income “with confidence month-on-month and year-to-year”, the CEO said.
Mercia styles itself as a “broad church manager” in terms of sectors, although businesses it invests in tend to have “modest capital needs”. Payton highlights that valuation entry points are often more appropriate in the regions, where Mercia typically invests compared to, say, London.
Payton said the company’s venture capital arm is focused typically on software, life sciences (to include digital health, diagnostics and medtech) and digital entertainment businesses.
Looking to the future, Payton said the firm is assessing which sectors to target in the post-COVID world, with the company having already invested over £11million since the UK’s lockdown began, into new and existing portfolio businesses. In combination, Mercia will continue to pursue its goal of scaling AuM to £1bn