Tuesday 03 December 2019

Mercia gets VCT boost with NVM deal

logoThe big news accompanying half-time results from recently rebranded Mercia Asset Management plc (see New brand, new focus, new chair for Mercia) is an agreement to acquire the venture capital trust (VCT) fund management business of NVM Private Equity LLP for up to £25m cash and shares. The acquisition will be part-funded by a £30m placing at 25p per share, a not insubstantial 22% discount to Mercia’s 32p closing price yesterday.

This is a significant acquisition for Mercia, boosting its VCT portfolio by some £270m, and increasing Mercia’s total assets under management by over 50% to £770m. Both Mercia and NVM are prolific investors in UK tech, sometimes in the same business (see Mercia and mates pop more dosh into Voxpopme). On the face of it, this deal makes good sense. Mercia gets a huge boost to its core VCT business, while (I assume) NVM gets to focus on its knitting (small management buyouts).

I met up again with Mercia CEO Mark Payton just the other week. He has taken Mercia from being a Midlands-focused university spin-out investor to a publicly quoted, regionally focused broad-based backer of young, high-growth UK tech companies. Payton reiterated his aim to grow Mercia into an operationally profitable business (not there yet) with £1b of assets under management. The NVM deal gets him substantially closed to the latter objective. Prudent management will be required to achieve the former.

Update: Just heard back from Mark Payton - the NVM deal will push Mercia into monthly profitability and he expects they will be profitable on a trading basis in FY2021. Good stuff!

Posted by: Anthony Miller

Tags: acquisition  

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