Join us to understand how Mercia uses different funds to support small companies through their growth stages.

This conversational webinar will provide an overview of a small number of the Mercia funds, which work together to form part of Mercia’s Complete Connected Capital strategy.

Our webinar series has been focused on our EIS funds, but the Northern VCTs joined the Mercia group in December 2019.

The investment stage and sector of the Mercia EIS and the Northern VCT overlap, and they have invested in the same company previously, and this will certainly increase in the future.

The Midlands Engine Investment Fund (MEIF) is a government-funded (via the British Business Bank) proof of concept fund, that makes earlier stage investments in Midlands-based companies. A large number of the MEIF investments are alongside the EIS fund, and recently we have successfully leveraged the Future Fund to invest in MEIF/EIS co-investments.

This webinar was hosted by Dr. Paul Mattick (Head of Sales and Private Investor Relations, EIS Funds), Julian Dennard (Fund Principal, MEIF) and Stephen Johnson (Investment Manager, VCT)

Join us on the 10th November when Chris Kilroy and Paul Mattick discuss the recent valuation uplifts in the EIS portfolio and the sale of two companies for over 8x cost of investment in the last three months.
Register for our next EIS webinar here

It may seem counter-intuitive for advisers to suggest their clients make a high-risk and potentially high-return investment into a venture capital focused EIS fund, in an uncertain economic climate. However, in addition to the benefit of investing in high growth technology companies at (potentially) the bottom of the market, there are multiple tax related drivers:

1. Clients are sitting on cash in a low interest rate environment
2. Delay of the tax-efficient investments that were planned for early 2020
3. The stamp duty holiday is driving the sale of second homes creating Capital Gains Tax issues
4. The reduction of Entrepreneurs Relief to £1m
5. Future budgets are likely to increase Capital Gains Tax

Most of these tax-related points are a result (indirectly) of Covid-19; whether that’s the actions that clients have taken during the crisis to increase their cash buffer, or selling their second homes. In addition to the points above, Covid-19 has reminded us all of our mortality, and EIS qualifying assets are out of the estate upon death after two years, or immediately if replacement property relief is available.

After the equity markets crashed in March, the recovery has been strong and markets are now potentially overpriced. The companies that EIS invests into are not directly affected by market volatility, as they are unquoted and can grow very quickly in markets that have been positively impacted by Covid-19, such as the medical devices, remote working, digitsation, food delivery and gaming. In isolation, each small company is high-risk, but through diverse portfolio construction, these risks can be managed, and the high-return nature captured.

The combination of managing income tax and capital gains through EIS, and substantial new market opportunities for small companies, means that financial advisers are seeing good reason to consider EIS at the moment.

For more information, please get in touch with Russell Fryer or the Mercia EIS Team.

Get in touch today

Earlier this year Pete Watson and Ben Tomlinson of Atlas Cloud, undertook one of the largest surveys of the working habits of British office workers since the announcement of the nationwide coronavirus lockdown.

The research looked into the working habits of more than 3,000 office workers during the coronavirus pandemic, providing valuable insight into the working lives of Britain’s office workers as millions of them are navigating the new world of work.

Join Pete and Ben as they talked through some of their survey findings, whilst also discussing:

  • Benefits and challenges of working from home
  • What we need to learn about enabling the systems and integrations required for remote working – focused on Microsoft Office 365 and Azure.
  • How perceptions of remote working have changed
  • Cyber security needed for hybrid working.

 

The Mercia EIS Fund will have its next close on 30th September. This will be the last opportunity to invest the entire EIS Fund before the 5th April 2021, which enables carry back to the 2019/2020 tax year.

Dr. Paul Mattick, Russell Fryer and Chris Kilroy hosted the latest webinar titled, ‘EIS carry back to the 2019/2020 tax year’.

In this webinar, the panel provided detail of the investment process and gave examples of the types of companies that are likely to be in the fund.

Mercia‘s Head of Sales and Private Investor Relations, Dr. Paul Mattick is with Business Development Manager Russell Fryer in this intriguing webinar based on the parallels between sport and business.

Paul brings deep insight from his own experience as a double World Champion and Olympic rower.

Russell, has achieved something even more impressive, having gone two years playing golf unbeaten, in addition to hitting no less than FOUR holes-in-one!

There are some distinct parallels between sport and business, but often the nuances are missed or not translated into the board room.

Join this unique discussion to hear Paul and Russell’s perspectives on sport and business.

Fast-growing legaltech business Clarilis has raised a further £6m in a Series B investment to support its ongoing growth. The funding has come from Mercia’s Northern Venture Capital Trust Funds (VCTs), which were an existing investor in the business, and Gresham House Ventures, investing on behalf of the Baronsmead VCTs.

The funding will assist the company’s continued international growth and fund its sales, marketing and product development activities.

Clarilis, which is based in Leamington Spa and has an office in Singapore, is a leading provider of automated drafting technology. Its CLARILIS™ platform was designed to automate complex suites of precedents, such as Share Purchase and Facility Agreement suites with many ancillaries, parties and complex underlying deal structures. CLARILIS™ saves significant amounts of lawyer time whilst ensuring that law firms and in-house legal departments draft consistently high-quality documentation.  This creates time for solicitors to focus on what they do best – providing bespoke advice to clients and handling non-standard aspects of transactions.

Clarilis was co-founded by brothers James Quinn, a former solicitor, and Kevin Quinn, the technical architect of the CLARILIS™ platform and former lead developer. Since its launch in 2015, it has experienced consistently strong growth and now boasts an impressive blue-chip client base including Addleshaw Goddard, Baker McKenzie, GoCompare, National Grid and Slaughter and May.

Henry Alty, Investment Director at Gresham House Ventures, said:

While the legal world has arguably been a late adopter of technology, firms are realising that automation is essential to driving both cost efficiency and resilience across distributed workforces.

“In Clarilis we have found an ambitious business with a market-leading solution and exceptional customer satisfaction as a result of its fully managed service. It exemplifies the type of technology-driven and scalable business model that our investment team look for. We’ve been impressed by the impact that Clarilis has already had in the market and as the business expands, particularly into the South East Asian market, we are excited to be bringing our experience to bear and to help facilitate its growth.”

Tim Levett, Investment Chairman of Mercia Northern VCTs, commented:

“We are pleased to be investing once again in this leading LegalTech business, particularly in this current environment where the rapid adoption of user-friendly consumer software has fundamentally changed user expectations within enterprise. Regardless of the complexities of any business process, elegant automation and consumer-grade UX are the critical success factors that have set Clarilis and its platform apart, especially filling the void left by legacy software in this sector.  

“Mercia’s strong tech and SaaS investment credentials and experience combined with our ability to invest through the lifecycle of a business will be important to support the team at Clarilis as they continue to scale the business.”

James Quinn, CEO and co-founder of Clarilis, added: “It’s fantastic to have the continued support from the investment team at Mercia Asset Management and I’m really pleased they’re backing us again.  We are also delighted that Gresham House has chosen to invest.  Gresham House were the clear choice here given Henry Alty and James Hendry’s in-depth knowledge of the LegalTech space and excellent insight.  The Gresham House team also share our vision for the development of the Clarilis platform going forward. 

“This investment will provide the resources required to bring significant enhancements to our platform and to further scale the Clarilis team both in the UK and abroad. 

The uniqueness of Clarilis’ intelligent drafting platform and managed service is resonating with organisations globally – particularly as current market conditions highlight the importance of technology that can provide a strategic advantage.”

Investment Director, Jill Williams explains how important Mercia‘s core principles have accelerated our ESG journey and how best practice is vital moving forward.

Many businesses will have some degree of track record in ‘making a difference’. At Mercia, we have a track record of positive impact within the UK’s regions. This is as much a representation of our core corporate values as it is about driving a wider agenda around the regional funding gap, and the need for fast-growth SMEs to have access to critical investment.

Our history and values have therefore formed the foundations on which to build as we commence our ESG journey. Codifying these principles around environmental, social and governance (ESG) issues into our policies and culture is now a natural extension of our purpose.

ESG has always had a place on the Board agenda, but is gaining traction on its implementation, accelerated both by the lockdown and by the societal disruption seen during this period. Environmental issues have taken centre stage and the Black Lives Matter movement has gathered pace, while the role that business must play in the wider agenda of diversity, social mobility and ethical governance has become more nuanced and more pressing.

We want to share our outlook and decisions around our ESG journey to provide some insight and to support NEDs in assisting the Boards of our portfolio businesses in navigating this topic. We have only taken the early steps of our journey, but we are now defining our own internal strategy, whilst also developing our practice around investment decision-making and our active ownership of the businesses in which we invest.

Responsible investment

From every starting point a course of action must be plotted, in particular the means by which progress and ultimately success will be measured. Using a recognised benchmark that not only acts as a guideline but is also universally recognised and approved by your industry and peers is important. This will differ for each sector, but for us the gold standard methodology is the UN’s Principles for Responsible Investment (PRI). The six principles are “a voluntary and aspirational set of investment principles that offer a menu of possible actions for incorporating ESG issues into investment practice” – essentially a blueprint to follow that also provides the impact rationale behind each action. We have also been inspired by the UN’s Sustainable Development Goals when defining our guiding principles.

Understanding the value of ESG is what will make it sustainable. As much as there is a higher moral purpose, there still needs to be a commercial imperative. Mercia recognises that good ESG performance is associated with better business performance. Managing compliance and reducing exposure to risk is aligned with managing for value and should lead to strategic advantage. We are fully invested in our belief that our increased focus on ESG will allow us to create, grow and protect value and ultimately generate market-leading returns. This belief must be owned by the entire team.

Leading by example

Successfully facilitating the adoption of ESG needs to be led from the highest level in the business, but ultimately be owned and delivered by a person or team, depending on the size of the business. A formal role or division will need autonomy and time to audit, review and make the necessary changes in terms of how a business conducts its business within an ESG framework.

For Mercia, this will be how we develop our strategy and practice to incorporate ESG issues into our investment decisions and portfolio management strategies on an increasing basis. Our Responsible Investment team will consider the whole of our investment cycle, from deal origination and assessment, through ownership, and towards realisation.

Responsible Investment principles will be steadily integrated over the course of the financial year into our investment papers, portfolio reporting and investor communications. Both pre- and post-investment, we will embrace a unified approach and measures across the investment process.

We will increase training for our investment ream on ESG-related risks and opportunities. We will clearly define processes and increase visibility of ESG within the investment decision-making process as well as embracing the monitoring and review of ESG, developing key performance indicators and targets. We have started this process by my appointment as ESG project leader, and the training that I have undertaken with the British Private Equity & Venture Capital Association.

ESG translated across our portfolio

An essential role for our non-executives will be to help embed our ESG principles across our portfolio. Naturally, any ESG considerations will have to be driven and delivered by the portfolio companies’ management teams. Meanwhile, we will be guided by Boards around where they see opportunity for value creation or strategic advantage, and we will provide support where risks are identified. We would like to see ESG on our boards’ agendas because we know its potential to add value. And the sooner we start this process, the greater that potential.

Jill Williams is Mercia’s Investment Director, Private Equity

Mercia‘s Head of Portfolio Resourcing, Lisa Ward shares her thoughts on how to tackle the new, challenging landscape post-COVID-19.

Remobilising a workforce, post-COVID-19, is no easy task because of the layered complexities that both operational and moral obligations bring to bear. Not only has the last 19 weeks of lock down wreaked havoc on organisations, but equally, the resulting societal disruption will also impact the emergence strategies needed in order to recover and achieve the forward momentum required to leverage opportunities that will present in a new business context.

A data-driven return

For any Board, how it supports management to address and utilise data will be critical for success moving forward. Whether it’s the health & safety of the workforce or the assessment of both legal and operational risk, all decision making needs to be data driven. With current scenarios being so fluid, decision making will have to be a process guided by the latest regional guidelines and regulations, or even aligned to a city-based health status. How and when a business returns to work will likely be on an office-to-office or site-by-site basis. Specific location-based directives, issued by local councils or government bodies, will need to be well documented with the requisite company policies aligned to these regulations. This should include robust version control to ensure that an ‘at-that-moment’ decision reflects the governance issued at that time and for that location. As much as we are entering an uncertain period, it is possible that someone on your workforce will contract the virus and therefore, to safeguard the company and all its stakeholders, it is essential that everything is documented.

Keeping track

It is not always possible to provide a tech-enabled solution but tracking and the correlation of data should be pulled into a company’s MI dashboard because this information will be requisite for the responsible management of the business. If manually handled, this process will be time-consuming and possibly ineffective so technology might be the better solution. Not only can this work out to be more cost-effective in the long-term, but it would also provide additional peace-of-mind to the workforce. Efficient systems prevent the need for mass quarantine or shutdowns. If an employee catches coronavirus, traceable contact history can identify which other team members need to quarantine without closing the entire business. It can also isolate where contact took place so that preventative measures can be immediately instituted. The challenge however, and where management need to be guided, is around privacy issues and what could be interpreted as employer surveillance. Tracking apps are not always welcome in the workplace with employees having the right to refuse use of these apps. And this gets complicated from an HR perspective, because at what stage does tracking within the context of COVID-19 become a reasonable requirement and failure to follow instruction leads to possible termination of that employee. Guidance will be required to look at each company’s specific risks and requirements and evaluate the need for tracing, balanced against employees’ expectations in respect to protecting their health, and the need to maintain business continuity.

Business salvation

Apart for guiding the Board on risk and control policies, a tactical review will be essential to navigate the new way of working. New routines have been established by a distributed workforce, and in situations where there has been no discernable loss of productivity, there is also going to be evidence of improvements; co-operation, speed of decision making, successful task execution, self-initiation of projects and problem solving that has either been enhanced because of the circumstances of lockdown, or is new behavior entirely. This should not be lost because of the application of pre-COVID-19 workplace conventions such as being office-based, nine-to-five or not embracing remote of flexible working.

The high-productivity rates, ‘always on call’ mindset, the focus and agility that may have been demonstrated during lockdown or because many employees were furloughed however, is not sustainable in the long-term. It has shed a light on how, with certain adaptions and changes in routine and location, a distributed workforce can positively impact a business and these learnings should be embraced and wherever possible, leveraged. If a company can support the three key tenants of communication, care/coaching and connectivity, any Board should be considering the opportunity that ‘a new way of working’ or being ‘digitally present’ offers. It is important to understand that this should not just be about cost-savings or company-biased improvements, but a chance to reset the culture, improve employee engagement and implement / improve key agendas such as diversity and ESG. It is also the time to reflect on what new skills are required to maximise on both the business opportunities and equally, manage the ubiquitous use of digital that now defines business development, marketing and indeed, most business engagement. In addition, which team members have demonstrated these or other ‘hidden’ talents and characteristics during lockdown. This will be essential to be able to balance the expectations of both the business and its employees during the recovery period, but importantly, it will provide the Board with the chance to evaluate what is required to harness the opportunities that will surface of this business recovery.

This transition to a new way of working won’t necessarily be easy because the impending recession will further impact the demand for hard decisions to be made; redundancies, contractual mitigation and other changes that will affect the current and future talent of the business as well as other stakeholders. This will be compounded by the implications of furlough and what will be the inevitable fallout of claims and counterclaims due to, in some instances, the hasty implementation of the Coronavirus Job Retention Scheme. As the Board take stock of the impact of the realistic and immediate cost-savings and future revenue opportunities that lockdown has exposed, it will be essential that strong HR leadership and the inclusion of external specialist advice is sought to ensure that the employees tasked to push on into this new future have both a business and moral roadmap to guide them.

Lisa Ward is Mercia’s Head of Portfolio Resourcing

 

 

 

 

 

 

 

 

 

 

 

 

 

Mercia‘s Head of Portfolio Resources, Lisa Ward writes how businesses have been affected in many different ways due to the global COVID-19 pandemic and why a shift in mentality is on the horizon.

As we anticipate the passing of the hurricane that is COVID-19, many businesses will be left to deal with the wake of issues that it has uncovered. No one has been immune to this pandemic and it will have undoubtedly affected every business in some way, often for the long term.

I’ve spoken with many members of our Non-Executive network in last 19 weeks of lockdown and perhaps unsurprisingly, there have been common themes in those conversations.

The evolution of Governance and debate about what arising conversations matter is just one example. Social movements such as Black Lives Matter have been a timely reminder for Boards to re-evaluate what measures, including ESG, they use to gauge success more broadly. Whilst the board agenda might not fundamentally change, there might now be new agenda items or a shift in emphasis of existing ones.

Secondly, it goes without saying that the economic environment in recent weeks has been the toughest for many years. Portfolio management teams have shown real resilience in what will possibly be one of the most trying times of their executive careers. Their dedication to the business, employees and shareholders has been thoroughly tested. As we begin to unwind, there are many things your board will be considering, but I’d like to highlight two for consideration:

  1. We can easily forget the reality of the immediate past. Partly, this is a protection instinct. Now is the time to reflect in order to ensure we learn from recent events. There’s a wealth of research that shows that our memory isn’t as consistent as we’d like to believe. What’s worse, we’re often guilty of changing the facts and adding false details to our memories without even realising. Instead, we should encourage taking stock and reflect upon how we dealt with these extraordinary circumstances. What worked well? What could we have done better? What can we learn from this unprecedented and challenging experience?

2. With remote working, we have literally had a ‘zoom’ window into the home lives of our colleagues and employees. Many of us, myself included, have had the impossible task of juggling home schooling, work, home life and health. No one is immune from burnout. Arianna Huffington (author and founder of the Huffington Post) has recently written about her own experiences and said it best in her concluding weekly remarks on Thrive Global, May 30th:

“Now, with burnout in the spotlight, companies have a fresh opportunity to step up, for the sake of their people and for the health of the bottom line. Focusing on people’s actual experience at work is no longer a nice-to-have, it’s a must-have for anyone who wants to succeed in the long run”.

Weathering a storm is part of life and can be stressful for individuals and businesses alike. However, no matter how dark the skies become they will pass and the blue sky beyond, which never leaves, will be seen once more. With effort and discipline, we can search for the positives within the negatives and use these to become better boards, companies and people.

Mercia’s EIS fund principal Peter Dines discusses with Dr. Paul Mattick the recent sale of a portfolio company for 8x cost of investment.

The pair also discussed:

– The Mercia groups investment model
– Our EIS is a venture capital investment with downside protection
– This exit illustrates the potential when investing with Mercia