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

Dr. Paul Mattick, Mercia‘s Head of Sales and Private Investor Relations, discusses how diversification and repeat investment impacts performance:

– Mercia creates the most diverse EIS fund in the market
– Diversification is important when investing in high-risk companies, to limit exposure to companies which will fail
– Repeat investment enhances exposure to our winners
– Our Investor Centre provides all our reporting, including tax certificates

Mercia‘s Investment Director, Jill Williams speaks alongside Ward Hadaway to discuss supporting Mercia’s portfolio through COVID-19 and what issues and challenges that have been encountered.

 

Those with the greatest chance of coming out of the current crisis are the companies that are actively engaged with their customers.

Customer Success, the process of proactively engaging with your customers to identify their challenges and anticipate needs is a proven way to increase retention and as a result, secure future revenues. In this webinar, Godfrey Ryan will outline best in class short and long term strategies for Customer Success. The recommendations will apply to companies that are new to Customer Success as well as those looking to improve their existing processes.

Godfrey is an experienced B2B commercial executive with a history of building high-performing teams and achieving software and service sales growth in the legal, aerospace and telecoms industries.

Godfrey was part of the executive management team of several start-up and PE-backed mid-size companies that exited through trade sale, private equity buyouts and mergers. This included overseeing the growth of a UK-based aviation software start-up through two transactions culminating in the sale to The Boeing Company.

Mercia‘s Head of Sales and Private Investor Relations, Dr. Paul Mattick joins Business Development Manager Russell Fryer, who present all aspects of the client journey when you choose to recommend Mercia’s EIS Fund, covering your clients’ journey.

Topics for discussion were:

  • Digital signing a pre-populated application form
  • Our Investor Centre provides all our reporting, including valuations
  • Investor Centre hosts all digital tax certificates
  • Clear communications, routed through the adviser wherever possibleThey also described the process for advisers, including:
  • Independent reviews
  • Adviser fees and net investment calculations
  • Our policy of adviser first communications
  • Access to our Investor Centre reporting for each of your clients

Join Mercia Fund Principal Ian Wilson as he chats to the experienced business leader, Diane Cheesebrough.

Both Ian and Diane will be discussing what you should be thinking about as a business owner ahead of the UK exiting lockdown, including more about the various Government schemes; those that you may have you accessed and what this means in terms of repayment and the ability to access other loan schemes or debt funds, the role of debt in your business moving forward and how equity could play a role, and what the real scenario is likely to be on exit.

The pair will also focus their attention on other matters including how to bring your staff back from furlough, how the changes in the market might impact your future funding requirements, as well as looking at what might have changed in your sector and the economy as a whole.

As the country takes steps to move out of lockdown, many employers are getting a better feel of the longer term effects of Covid-19 and what the resulting recession will mean for their business and employees.

In this webinar, our legal experts Paul Chamberlain of JMW Solicitors and Sarah Thawley, Mercia’s Head of Legal, discuss some of  the changes and what they mean in practice for businesses.

Join them as they discuss the extension of the furlough scheme and issues encountered by employers to date in making use of the furlough scheme, redundancies, the circumstances in which you can and should consider redundancies and how to run a redundancy process well.