A point of view – Dr Mark Payton

Dr Mark Payton, CEO, comments on the power of core values.

At the start of the pandemic in March last year, it was difficult to predict where anything was heading. As we were preparing to start our new financial year, the immediate challenge for us was to determine if what lay ahead was a repeat of 2008 or if not, were we getting ready for the aftermath of another 1999? The ubiquitous question in every boardroom had to have been, “what is the next 12 months going to look like?”

What did happen was accelerated change; some of it positive, some of it negative, much of it permanent. What did not change however, were our core values, our mission and the performance of the people who have built Mercia from these strong foundations.

That is why, over the last 12 months, our key stakeholders being investees, fund investors, employees and shareholders, continued to choose us.

“The right capital to the right businesses at the right time”

Our ability to create value through the proactive local delivery of the right form of capital, to the right businesses, at the right time, did not falter and we delivered six exits in the last 12 months. We got things done because we continued to apply our core values to the way we do business: being Growth focused, Responsive, Knowledgeable and Trusted. These core values have always defined Mercia employees and, in my view, is how we have always differentiated ourselves. The extraordinary quality of the people that I am fortunate enough to work with has remained constant.

Knowledgeable and trusted

Mercia has always been on a mission to find great domestic businesses with global potential. Because of our strong local footprint, deep understanding and knowledge of the regions, we have been successful in finding such businesses through serial founders that trust us to invest and behave responsibly. Some of these are in quite discrete sectors which we are only able to access through our specialist expertise and established networks, many of which have performed well in this current environment. OXGENE, one of our six exits in 2020, is a good example of Mercia working with the same team again. This investment was the third time working with Mercia for the co-founder, Prof Len Seymour.

More broadly, for Life Sciences and the diagnostic businesses, of which we have always been a big supporter, the pandemic has proven the catalyst to hasten growth. Indeed, The Native Antigen Company was one of our first exits in 2020.

Growth focused

I have always held the firm belief that you are either growing or you are shrinking; there is no standing still and we very much apply the growth mindset to everything we do, both internally and externally. The success of this approach is exemplified by the three software businesses that we exited at the end of 2020: Clear Review, Agilitas and Refract all delivered excellent returns. Within our software portfolio, Voxpopme and Intechnica continue to grow.

Responsive and responsible

What has also been an interesting development over this period is the notably increased impetus on Environmental, Social and Governance (“ESG”) issues, quite rightly driving the agenda in terms of consumers, but also in terms of capital. We have seen all elements of ESG impacting the investing landscape, but it is the environmental piece that is fostering the most change and opportunity for our portfolio. Who would have ever predicted that Jaguar Land Rover would say that by 2025 every vehicle it produces would be electric? Strategic decisions like this are supported by businesses such as Impression Technologies and Warwick Acoustics, who meet the challenges of climate change through light-weighting, and have a critical role to play in improving sustainability. Faradion and the sustainability, stability and safety offered through its sodium-ion battery technology, is increasingly well placed in the electric vehicle and energy storage markets.

Being responsive reinforces our Complete Connected Capital model and our ability to influence and support businesses when they need to pivot or grab the mantle of opportunity. Mercia’s discrete pools of capital that overlay and interconnect are critical for sustained growth. If you are a founder of a business, it can be a challenge to raise money. It takes the focus away from operations, and we want our management teams to concentrate on running businesses, not raising money. Our capital model means that Mercia can do early-stage and later stage venture, as well as having private equity and debt woven into the capital journey. Furthermore, we have our own balance sheet proprietary capital that we not only invest in our managed funds via small minority stakes, but also alongside these funds to scale businesses rapidly.

May brings with it green shoots; signs of accelerated momentum across a multitude of businesses, notably in sectors such as e-learning, clean tech and delivery services, all of which have seen significant backing from Mercia in recent months. We are expanding our team to meet the demand seen from the many ambitious businesses across the regions, while also ensuring we have the knowledge and skill sets needed to keep us at the forefront of societal and sectoral trends. We are pleased with the progress made and the impact this purpose-led approach is having on our business. There is no doubt that, moving forward, we will be drawing heavily on the resilience of our team, however there is a great sense of optimism throughout Mercia as we begin the new financial year.

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