Mercia EIS Funds 2021

Mercia’s EIS fund is a tax-efficient technology fund, optimised to source, support and scale UK growth enterprise across key sectors in which we have deep expertise. The Fund aims to triple (3x) invested capital in five to seven years (including tax reliefs), by the creation of a diverse, regionally focused technology fund.

Key features of Mercia EIS fund

Minimum Investment

£25,000

Target portfolio size

Approximately 12 companies

Deployment timeframe

Each EIS fund aims to be fully invested within 12 months of the fund closing

Target performance

Mercia aims to triple invested capital (including income tax relief and loss relief)

Closing dates

We always have an EIS Fund open, with funds closing at the end of March, June and December of each year

Investments are made into sectors

which have modest capital requirements but high growth potential

Past performance*

EIS funds before April 2015 average 3.2x including tax, with 1.9x realised.

We continue to find, nurture and realise value in the regions. In 2020 against a backdrop of a worldwide pandemic, we generated a 8.6x return for our Enterprise Investment Scheme (EIS) investors from one exit and an 8x return from a second exit. These are significant results, not least because they completed during a period of turbulence and immense change, but also because they demonstrate the competitive edge derived from our Complete Connected Capital and the leverage offered by our resilient business model

– Dr Mark Payton, Chief Executive Officer

Mercia's recent EIS investments

Members of our investment team have been giving updates on Mercia’s EIS portfolio companies, as well as explaining a little more about our co-investment model.

Learn more about our portfolio companies such as InviziusCyan ForensicsNuVisionEventum Orthopaedics and many others.

Our business model

We firmly believe in both the resilience and the value that resides within SMEs located in the UK’s regions. Mercia has been working hard to back exceptional businesses and, in part, redress the funding imbalance. As a result, we are proud to be one of the most active investors in the UK regions, fueling our own growth in the provision of private equity, venture capital and debt – what we term our ‘Complete Connected Capital’

Mercia is a responsible investor

 

  • Codify our existing ESG processes
  • Regional investor, working with the government to stimulate regional development
  • We are a value-add investors, focused on the Governance in ESG
  • Leverage, via our portfolio of 400 companies

 

“Companies that pay attention to environmental; social and governance concerns do not experience a drag on value creation – in fact, quite the opposite”

Watch ‘What ESG adds to Mercia’s EIS Funds’ webinar here
Visit Mercia’s ESG page here

 

The Mercia EIS proposition is already independently recognised to be one of the leading EIS funds in the market and we are on a journey. We are building on our group’s institutional standards to create a series of successful EIS funds, supporting great high-growth companies, and providing consistent returns to investors.

– Dr Paul Mattick, Head of Sales & Private Investor Relations

 

What makes us different

Regional focus

London and the South East have a significant oversupply of capital creating high pre-money valuations. The UK regions offer exciting deals with businesses that are priced sensibly and have relatively modest capital needs that we can, if we choose to, support solely from our own means.

Experienced team

Over 100 colleagues have strengthened Mercia’s business model through their combined business expertise, geographic and investment knowledge. Mercia has eight regional offices across the UK, as well as two other additional locations from our staff can be based. Our team has been our priority during 2020 and in response to COVID-19, we have ensured that we safeguarded the team’s health and wellbeing.

Mercia platform

Our Platform provides access to high-quality business leaders, advisory teams and operational specialists to offer relevant support our portfolio.

Established partnerships

Powerful relationships and deeply embedded ecosystems provide unparalleled access to a wealth of opportunities across the regions. From our 19 university partnerships to our non-executive networks, we are well placed as the investment partner of choice.

We are delivering strong returns for our investors

We sold The Native Antigen Company to LGC in July 2020

Leading supplier of native and recombinant viral and bacterial antigens, antibodies and immunoassays. We first invested in 2013 via MGF1 (EIS Fund). Delivered a circa 8.6 times return for the EIS Fund.

We sold Clear Review to Advanced in October 2020

SaaS tool providing organisations with data and systems to improve performance management. We first invested in 2018 via MGF8 (EIS Fund). Acquired for up to £26m in October 2020 which delivered a circa 8 times return for the EIS Fund.

We sold Refract to Allego in December 2020

Helps organisations improve the performance of their sales teams giving managers insight into team members’ conversations. We first invested in 2016 via MGF5 (EIS Fund). Delivered a profitable return for our investors.

We sold Oxgene to WuXi AppTec in March 2021

Specialises in advanced technologies for cell and gene therapy. SEIS/EIS invested between 2013 and 2016, followed by Mercia PLC, and delivered a return of up to 20 times cost.

Sense Biodetection

With operations in both the UK and the US, Sense  is focused on the development of instrument-free  molecular diagnostics delivering true point-of-care  molecular testing.

In October 2019 Sense raised £10.5million in Series A investments and concurrently secured a grant of £1.8million from Innovate UK.

In March 2020, Sense announced an accelerated programme to launch the world’s first instrument-free, point-of-care molecular diagnostic test for COVID-19, partnering with Phillips-Medisize (a leading global medical device innovator, developer and manufacturer, owned by Molex) to scale up production of its testing to meet the growing demand for rapid diagnostics. In October of the same year the company also announced successful series B investment to support their scale up plans.

Voxpopme

Voxpopme, Birmingham-founded, but US-based, Voxpopme is a video insights platform that provides innovative video analytics for internationally renowned clients such as Microsoft, Shell,  Coca-Cola, Verizon and Expedia.

The business has demonstrated continued growth in ARR over the last six months to 30 September 2020 against the backdrop of COVID-19. Post period end in November 2020, Voxpopme secured a syndicated investment of  £3.1million in which Mercia contributed a direct investment of £0.8million. This company demonstrates Mercia’s Complete Connected Capital in action as it has received investment from our EIS Funds, the Northern VCT Funds as well as Mercia’s balance sheet.

The EIS team at Mercia

*Notes regarding performance

Exiting your investment

Any EIS or SEIS investment should be considered to be a medium to long-term investment, and this asset-class is inherently high-risk and illiquid.

Mercia models for a third of its EIS companies to fail, and operates a ‘fail fast’ policy, which means that we will not provide follow-on funding to failing companies. This is good industry practice and means more capital is deployed into the remaining successful companies. Our fail fast policy has resulted in a total of fifteen businesses crystallising a loss, but interestingly only seven of these companies have ever received EIS investment (the others have received only SEIS).

The companies that do succeed are modelled to deliver high-multiple cash returns, but this process can take a long time, which makes the exit process even more important.

There are traditionally two mechanisms to exit a successful investment

  1. A stock market listing (e.g. AIM) and subsequent share sale after a lock-in period (often one year)
  2. A trade sale (M&A), where payment may not be 100% cash and may include shares in the acquirer

However, there may be options for alternative exits, depending on how the company progresses.

  1. The past performance of previous Mercia EIS funds, or related funds, is not a guide to future performance and may not necessarily be repeated.
  2. Where applicable, tax benefits include income tax relief and any loss relief. It does not take account of benefits from the management of Capital Gains Tax, exemption from Inheritance Tax or Business Investment Relief.
  3. Mercia aims to triple invested capital after seven years, this target is based on the net cost of investment, with 100% investment in EIS-qualifying companies. Income tax relief and loss relief are factored in when quoting this target.
  4. The performance figures assume that the investor is a UK tax-payer, with enough tax liabilities to make full use of the tax benefits as described in note 2.
  5. Valuations are not calculated for funds which have been invested for less than 12 months. Share prices calculated using International Private Equity and Venture Capital valuation guidelines, and are accurate as of 30 September 2020.

These notes should be read in conjunction with the above performance data.

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