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Woodford-backed fund group Mercia buys rival in bumper VCT deal

3 December 2019

Mercia Asset Management has bought rival NVM Private Equity to add three venture capital trusts (VCTs) with £270 million in assets.

Mercia Asset Management has bought rival NVM Private Equity to add three venture capital trusts (VCTs) with £270 million in assets. 

NVM’s Northern Venture Trust , Northern 2 VCT and Northern 3 VCT will all be transferred to Mercia, alongside its management team. 

The deal will cost Mercia £25 million, and will be funded by a £30 million equity raising at 25p per share.

The purchase creates the largest VCT manager in the North East, increasing Mercia's total assets by more than 50%, to approximately £770 million.

NVM invests in 60 regional portfolio companies, with 17 listed, 27 private venture and 16 private equity.

Alongside the deal, NVM’s management team will move across, including Tim Levett (who will remain chair of NVM), and investment director Charles Winward who leads the new deal process.

Neil Woodford’s disgraced Equity Income fund holds an 11% stake in AIM-listed Mercia, having held almost a fifth of the stock before selling a big chunk last month. His Patient Capital Trust also has an allocation to the asset manager. 

Embatted fund manager Mark Barnett also last month cut the holding in Mercia he owns via his Invesco High Income UK and Income UK funds. 

Luke Barnett, analyst at MJ Hudson Allenbridge, said: ‘NVM is traditionally a PE/MBO [private equity/management buy-out] house and now needs to make growth investments. Access to Mercia’s funding channels and deal flow will be beneficial to its ability to effectively execute a growth strategy. 

‘From Mercia’s perspective, it significantly increases its assets under management and gives it access to a very popular set of VCTs in the market.’

Mark Payton, Mercia’s chief executive, said: ‘We are delighted to announce the conditional acquisition of the NVM VCT business, which is highly complementary to Mercia's existing activities and will cement our position as a leading provider of complete, connected capital to SMEs in the UK regions.’ 

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