Mercia Asset Management
Ticker: MERC Exchange: AIM

Mercia Asset Management (Mercia) was founded in 2010 and listed on the AIM market of the London Stock Exchange in Dec 2014. It provides venture capital, private equity and debt investments to mostly regional (ex-London) UK businesses, investing between £100k and £10m. It manages c £1.7bn of funds for third parties and invests c£200m of its own capital alongside these funds.

A deeply undervalued specialist in private markets

Mercia is one of the largest investors in ‘regional’ (ex-London) UK growth businesses. Its primary focus is managing funds of around £1.6bn for third parties (FUM) in structures such as Venture Capital Trusts, EIS funds and funds for institutional investors. The business is scaling. FUM has more than doubled in two years. Record net flows exceeded £0.5bn in FY24. And growth is by far the highest among a London-listed peer group.

FY24 revenue grew 18% y-o-y to £30.4m, EBITDA 7% to £5.5m, a margin of 18.2%, likely to ratchet up over the longer term as the business scales further. Indeed, the newly announced Mercia 27:100% growth strategy aims to reach £3bn AUM (FUM + proprietary capital) and £11m EBITDA in 3 years.

Mercia also invests its own capital into a portfolio of ‘direct investments’ (NAV: £189m on 31 Mar 24). Its record is impressive. 

A strategic change is to be proposed at the 2024 AGM - to focus primarily on highly profitable and fast-growing fund management, and to stop making new direct investments (while supporting existing investments). This allows Mercia to reclassify from an investment company to a trading company under AIM rules, allowing gains made on shares to be IHT-exempt (under certain conditions).

With a fundamental value 65% above the share price, we see potential for a significant rerating.



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